What is new in California Labor & Employment Legislation? September Update

Perhaps the most significant litigation risk for companies in California, relates to our extensive and ever-changing labor and employment regulations.  Here are a few important “hot of the press” updates provided by Dorsey Southern California Partner Gabrielle Wirth.  We will be returning to some or all of these subjects in future posts, but here is a brief summary of these new developments.

California Workplace Religious Freedom Law

AB 1964 (Chapter 287) amends the Fair Employment and Housing Act to expand an employer’s duty to reasonably accommodate worker’s religious beliefs and observances.  This includes the practice of wearing religious clothing or a religious hairstyle unless such accommodation would impose an undue hardship on the employer.  An accommodation would not be considered reasonable if the employee is segregated from customers or removed from public view.  Forms of head, facial and body hair that are part of the observance by an individual of his or her religious creed are protected.

Employer Tax Issues

Employment Development Department (“EDD”) changes the rules on Class Action Settlements

California’s Unemployment Insurance Fund (UIF) has been out of money for more than three years and has borrowed more than $10 million dollars from the federal government according to the Sacramento Bee.  The UIF is funded by the employees’ share of payroll taxes. (The Disability Insurance Fund is funded by the employee’s payroll tax withholdings.)  Prior to the EDD changes, employers who settled class actions could agree to have the claims administrator settling the case to pay all employer taxes out of the qualified settlement fund (“QSF”).  The QSF was responsible for all payments and tax reporting related to the case.

The EDD has recently shifted the burden for reporting and payments for Unemployment Insurance (UI), Employment Training Tax (ETT), and Disability Insurance (DI) contributions from the QSF to the employer.  The EDD has not sent out a notification or announcement of this change with instructions or an implementation plan.  EDD posted this brief paragraph on their website:

If back pay (wages) is awarded in a class action settlement, who is responsible for reporting the wages and payroll taxes?

When a class action litigation involves wage and hour issues and the settlement requires back pay to be made by a third-party administrator, the employer of the workers (the defendant) is responsible for reporting subject wages and paying Unemployment Insurance, Employment Training Tax, and State Disability Insurance.  The third-party administrator who controls the payment of the back pay is responsible for reporting Personal Income Tax (PIT) wages and withholding PIT from the payments. 

This change is expected to increase the costs of these tax payments and thus the settlements.

Discrimination Against the Unemployed

AB 1450 (Chapter 3.95 (commencing with Section 1045) to Part 3 of Division 2 of the Labor Code, and Section 10285.6 to the Public Contract Code, relating to employment) makes it unlawful, except as required by law in a bona fide occupational qualifications, for an employer or employment agency to refuse to consider an individual for employment because of that individual’s status as unemployed.  While the bill does not create a private cause of action benefiting the aggrieved individual to sue directly, it creates a series of penalties for violations.  The bill amends the State Contract Act applicable to government contracts to provide that a violation of this law also constitutes a breach of contract with respect to all new state contracts after January 1, 2013 and may be grounds for canceling, terminating or suspending the contract in disbarment.

Also of Note–The California Homemade Foods Act

AB 1616 (Chapter 415) Allows “cottage food operations” in private homes where homemade goods are made for the sale to stores restaurants and the public.  Currently the cost of offering the equipment and training necessary to obtain a license for a certified commercial kitchen is a barrier to small entrepreneurs who sell foods such as breads, jams, chocolate.  The bill exempts these cottage food operations from comprehensive food processing regulations and Sherman law requirements and allows them to operate under a simpler regulatory structure.

Bills Still Pending on the Governors Desk

Employer use of Social Media, AB 1844

UPDATE:  This bill and a companion bill were signed by Governor Brown on September 27, 2012.  A summary of these bills is available here.

Personnel Records Inspection, AB 2674

Please check back for further updates on these pending bills.

 I wish to thank Gabrielle for providing these updates to LeftCoastLaw.  Gabrielle can be reached at wirth.gabrielle@dorsey.com.