California Employment Laws for 2013

December 2012

A host of new employment laws go into effect beginning January 1, 2013. They range from anti-discrimination protections to social media safeguards and wage statement changes. 
Ericksen Arbuthnot will inform you of these changes in a series of three emails. 
Unless specified, the following list of new legislation goes into effect on January 1, 2013.

Human Trafficking Posting SB 1193

SB 1193 requires specified businesses to post an 8.5” x 11” notice, on or before April 1, 2013, that contains information about organizations that provide services to eliminate slavery and human trafficking. The Department of Justice will develop a model notice that complies with the requirements of SB 1193 and make the model notice available for download on the department's Internet Web site.

This bill would require specified businesses and other establishments to post a notice that contains information related to slavery and human trafficking, including information related to two non-profit organizations that provide services in support of the elimination of slavery and human trafficking. The bill also would require the establishments to print the notice in English, Spanish and in any other language that is the most widely spoken language in the county where the establishment is located and for which translation is mandated by the federal Voting Rights Act.

To the extent that the bill would impose additional duties on local government agencies, it would impose a state-mandated local program.

If a business or establishment fails to comply with these requirements, it is liable for a civil penalty of $500 for a first offense and $1,000 for each subsequent offense. The bill would authorize the Attorney General and local prosecutorial agencies, as specified, to bring an action to impose one of these civil penalties against a business or establishment if a local or state agency with authority to regulate that business or establishment has provided notice of the violation to the business or establishment. The business or establishment is subject to a penalty if it does not correct the violation within 30 days from the date the notice is sent to the business or establishment and the verified violation was not corrected within that 30-day period.

Fair Employment/Housing Commission Eliminated, Duties Transferred to Fair Employment/Housing Department SB 1038

SB 1038 eliminates the Fair Employment and Housing Commission (FEHC), transfers its duties to the Department of Fair Employment and Housing (DFEH) and makes certain other changes to the Fair Employment and Housing Act (FEHA). The new law takes effect on January 1, 2013.

The bill would establish the Fair Employment and Housing Enforcement and Litigation Fund in the State Treasury to be administered by the department, subject to appropriation, for purposes of deposit of attorney's fees and costs awarded to the department in specified civil actions. The bill would expand specified powers of the department related to complaints, mediations and prosecutions and would provide mandatory dispute resolution at no cost to the parties involved, as specified. The bill would eliminate a specified cap of actual damages under the act and would instead require certain actions be brought in court by civil action, rather than by accusation by the department.

The FEHC's function has been twofold:

  • To adjudicate discrimination complaints prosecuted by the DFEH; and

  • To promulgate regulations and define and interpret the FEHA.


Currently, the DFEH has the power to receive, investigate and conciliate claims of employment and housing discrimination, while the FEHC conducts hearings on these claims and can subpoena witnesses, publish opinions and publications and conduct mediations at the DFEH's request.

With SB 1038, these FEHC functions will be assigned to the DFEH. SB 1038 also creates a Fair Employment and Housing Council within the DFEH which will assume the FEHC's former powers and duties. There will no longer be an administrative body designated to decide DFEH-prosecuted complaints. Consisting of seven members appointed by the Governor, the Council will decide which cases will be prosecuted and which will not. Should the DFEH decide to prosecute a complaint, the venue in California will now be civil court. Part of the rationale behind the switch to civil court is that most key changes in employment law are made in the courtroom and not before administrative bodies.

This administrative change will dramatically shift the cost burden in employee/employer disputes. While the FEHC is an employee-friendly forum, it still provides employers with a lower-cost alternative to litigation. In cases adjudicated under the FEHC, emotional distress damages and administrative fines are limited to $150,000. Thus, employers enjoy the benefit of a “cap” on damages. Additionally, monetary awards by the FEHC have often been significantly less than awards by juries.

With the entrance of the DFEH into the state civil court system, civil procedure and court rules will now apply, exposing employers to possible attorneys' fees (currently set at $170 per hour); expert witness fees and unlimited damages. The DFEH has stated that this new provision of costs and fees does not incentivize the DFEH to prosecute more cases and will not affect its decisions in selecting cases to prosecute and that the current scheme is not a “money-making” one.

SB 1038 makes changes to actions that the DFEH does decide to prosecute: it requires free mandatory mediation with DFEH mediators before the DFEH can file suit in civil court. Should the mandatory mediation not result in a resolution, any DFEH attorney involved in the initial investigation or mediation will be barred from the civil suit. The good news for employers is that the DFEH boasts an 80% success rate in its mediation program. The downside may be that the possibility of facing higher in-court fees will incentivize employers to settle more often and for larger amounts.

Unemployment Insurance: Overpayment and Penalties AB 1845

AB 1845 implements a number of changes to California unemployment insurance law in order to comply with new federal law designed to regulate the integrity of state management of unemployment benefits, including:

  • Limits the circumstances under which EDD can credit the employer's unemployment reserve account. EDD can no longer credit an employer's account for overpayment of benefits if EDD determines that the overpayment was made because the employer or an agent of the employer was at fault for failing to respond to requests for information about the claim in a timely or adequate fashion. The determination will be made when the entity or agent fails to respond timely or adequately in two instances relating to an individual claim;

  • Increases the list of circumstances under which an employer's reserve account will generally not be charged for a claim. If the claimant left the employer's employ for a substantially better job, the employer's account will generally not be charged;

  • Clarifies that the obligation of employers to report newly hired employees to EDD shall include any employee who previously worked for the employer, but who has been separated from such prior employment for at least 60 consecutive days. The report is required to be submitted within 20 days of hiring the employee unless the employer transmits the reports magnetically or electronically. In that case, the employer must report twice monthly with transmissions that are not less than 12 days and not more than 16 days apart; and

  • Adds individual liability for penalties. Previously, an employer could be liable for penalties associated with willfully making false statements or willfully failing to report material facts that relate to a claim for unemployment benefits. Going forward, the penalties can be assessed directly against an agent of the employer if EDD determines that the agent is responsible for the false statement or failure to report material facts. The penalties can also be assessed against both the employer and the employer's agent.


California Secure Choice Retirement Savings Trust Act SB 1234

SB 1234 establishes the California Secure Choice Retirement Savings Trust Act, which creates the California Secure Choice Retirement Savings. The new law requires eligible employers to offer a payroll deposit retirement savings arrangement so that eligible employees could contribute a portion of their salary or wages to a retirement savings program account in the California Secure Choice Retirement Savings Program. The bill requires eligible employees to participate in the program, unless the employee opts out of the program. The bill goes into effect January 1, 2013.

Companies with more than five workers, which don't already offer retirement plans to employees, will be required to participate. Employers would withhold 3 percent of each worker's pay for safe keeping in the fund, unless the worker acts to opt out. The fund is essentially a state managed 401k plan for California workers who do not currently have access to a similar plan operated by their employer.

Though signed by the governor, the law will only become operative if the board of the retirement program created by the law determines, based on a market analysis, that the program will be self-sustaining and that enough money is initially provided by private entities, federal funding or state funding to allow it to be fully implemented. And the board cannot implement the program if the employee accounts fail to qualify for favorable tax treatment as Individual Retirement Accounts under the federal tax code or it is determined that the program is an “employee benefit plan” under ERISA.

Once the retirement fund is established by the state, employers who are not exempt from the law will need to establish arrangements for employee participation within a set period of time based on the size of the employer: three months for employers with more than 100 eligible employees, six months for those with more than 50 and up to 100 eligible employees, and nine months for those with five and up to 50 eligible employees.

Employers will retain the option of setting up an employer-sponsored retirement plan and not participating in the program.

A participating employer must designate a biannual open enrollment period during which employees who initially elected to opt out will be enrolled unless they opt out again. Employees who have opted out can only enroll during the open enrollment period. However, participating employees will be allowed to terminate their participation in the program at any time by submitting a completed opt-out form.

Participating employers will be allowed to make contributions to their employees' accounts in addition to the mandatory employee-funded contributions, provided that the contributions would be permitted under the Internal Revenue Code and not cause the program to be subject to jurisdiction under ERISA.

The law shields employers from liability for employees' decisions to participate in or opt out of the program or for the investment decisions of employees who participate in the retirement program.

Employers who fail to have a required direct deposit arrangement in place for employee contributions are subject to civil penalties in the amount of $500 per eligible employee, unless they establish “good cause” for the failure to have the arrangements in place.

Mandatory Child Abuse Reporting Extended To Computer Technicians AB 1817

California's Child Abuse and Neglect Reporting Act makes it a crime for a “mandated reporter” to fail to report to law enforcement any instance when the person knows or reasonably suspects a child has been the victim of abuse or neglect as a result of some observation or information learned as a result of the person's professional capacity or employment. AB 1817 adds “commercial computer technicians” to the list of mandated reporters. A “commercial computer technician” is broadly defined as a person who works for a company that charges a fee for “repairing, installing, or otherwise servicing a computer or computer component, including, but not limited to, a computer part, device, memory storage or recording mechanism, auxiliary storage recording or memory capacity, or any other material relating to the operation of a computer or computer network system . . . .” Current law applies to the traditional “print media,” so this bill would update that law for the digital technology era. The law would require computer professionals to make a report when they have knowledge of or observe a child who appears to be under 16 years of age being subject to sexual conduct on an electronic medium.

To encourage reporting, the law immunizes a covered computer technician from civil or criminal liability if he or she provides a computer or computer component to an investigating law enforcement agency pursuant to a warrant. If a computer technician fails to report an incident, he or she may be criminally prosecuted for violating the reporting requirement or subject to civil liability.

An employer of covered computer technicians may establish a reporting program to facilitate reporting to law enforcement. If such a program is established, a single employee must be designated to receive the reports from the computer technicians and that person then has the obligation to notify law enforcement of suspected child abuse and is subject to prosecution if he or she fails to do so. If such a program is established and a covered computer technician has followed the employer's reporting procedure, the employee is deemed to have satisfied his or her obligations under the law.

Limitation on Length of Depositions in Civil Court Cases AB 1875

Currently depositions in civil cases filed in California state courts are not subject to any time limits, but in cases filed in federal court there is a seven hour limit unless the parties agree to or the court approves a longer deposition. AB 1875 establishes a similar seven hour limit for depositions in California state court cases, which, as in federal court cases, can be extended by agreement of the parties or court order.

Significant to employers, the new law exempts depositions of “witnesses in cases brought by an employee or applicant for employment against an employer for acts or omissions arising out of or relating to the employment relationship.” The bill's failure to define “employee” may create confusion in cases where a plaintiff alleges he or she was misclassified as an independent contractor and the defendant maintains the plaintiff was properly classified.

Other exceptions to the new California rule include:

  1. Parties may stipulate to exceed the time for a given deposition or a specific case;
  2. It does not apply to expert depositions;
  3. It does not apply to cases designated as complex cases unless a licensed physician provides a declaration of illness or medical condition raising substantial medical doubt of survival beyond six months, in which case the deposition is limited to two days of no more than seven hours of total testimony; and
  4. Persons Most Qualified/knowledgeable are not limited by this rule.

The bill would require the court to allow additional time if necessary to fairly examine the deponent or if the deponent, another person or any other circumstance impedes or delays the examination.

Vexatious Pro Per Litigants AB 2274

Employers are sometimes subjected to frivolous lawsuits by disgruntled former employees who represent themselves or continue on their own after a lawyer who initially represented the plaintiff withdraws. Current law allows a defendant to request that the court order a vexatious plaintiff (defined as a plaintiff who filed the action himself or herself, i.e., “pro per”) to post a bond or other security to cover a potential cost award against the pro per plaintiff.

The defendant must show that there is not a reasonable probability that the pro per plaintiff will prevail in the lawsuit. However, this does not end the case and the defendant must continue incurring attorneys' fees and other expenses that may not be recoverable after prevailing. It is not available if the pro per plaintiff was initially represented by a lawyer. AB 2274 changes this by authorizing a court to dismiss a lawsuit by a pro per plaintiff (even if the pro per plaintiff was represented by counsel at the time the lawsuit was filed) where it is shown that the action has no merit and has been filed for the purposes of harassment or delay.

Farm Labor Contractors AB 1675

AB 1675 changes the penalties for failing to license farm labor contractors. Existing law requires farm labor contractors to be licensed by the Labor Commissioner and to comply with specified employment laws applicable to farm labor contractors. Under existing law, a person who violates farm labor contractor requirements is guilty of a misdemeanor punishable by specified fines or imprisonment in the county jail for not more than six months, or both.

Under existing law, farm labor contractors are required to be licensed, however there is no penalty for farm labor contractors that practice without a license. The Labor Commissioner's only enforcement authority is to refer the matter for a possible criminal misdemeanor prosecution, which is costly to the state. As such, licensing violations are rarely, if ever, prosecuted and leave the Labor Commissioner, without the legal weapons that exist in other contexts.

This new law would subject a person who violates the licensing requirement to citations issued by the Labor Commissioner and civil penalties that increase as the number of citations for violations increase.

For any initial citation, it will cost $100 for each farmworker employed by the unlicensed person, plus $100 for each calendar day that a violation occurs, for a total penalty not to exceed $10,000. For a second citation, it will cost $200 for each farmworker employed by the unlicensed person, plus $200 for each calendar day that a violation occurs, for a total penalty not to exceed $20,000. For a third or subsequent citation, it will cost $500 for each farmworker employed by the unlicensed person, plus $500 for each calendar day that a violation occurs, for a total penalty not to exceed $50,000.

Any civil penalties collected will be deposited into the Farmworker Remedial account and are available, upon appropriation by the Legislature, for purposes of regulating farm labor contractors. The account funds are derived from contractor licensing fees and accessed when contractors are unable to pay their workers or to make an employee whole when they've been wronged by the contractor.

Warehouse Workers AB 1855

AB 1855 adds warehouse workers to the list of specified contractors subject to sufficient funds requirements.

Specifically, existing law prohibits a person or entity from entering into an agreement for labor or services from specified contractors (construction, farm labor, garment, janitorial or security guard) where the person or entity knows, or should have known, that the contract or agreement does not include funds sufficient to comply with applicable laws or regulations.

The California Public Records Act requires state and local agencies to make public records available for inspection, subject to specified criteria, and with specified exceptions. AB 1855 requires that upon the request of the Labor Commissioner, the person entering into the written agreement or contract must provide to the Labor Commissioner a copy of the provisions of the contract or agreement, and any other documentation, as provided. The bill would exempt any documents received by the Labor Commissioner pursuant to this requirement from the California Public Records Act.