The past year has been a very active one for employment legislation. The Legislature and Governor have passed a number of bills expanding protections for employees. This Commentary describes the most significant legislation enacted and vetoed in the employment field this year.

Raise Minimum Wage

The Industrial Welfare Commission (IWC) unanimously approved a $1 increase in the state minimum wage to be phased in over the next two years. On January 1, 2001, the state minimum wage will increase from $5.75 to $6.25 an hour. On January 1, 2002, the minimum wage will increase to $6.75. The phase-in was a compromise in order to give small businesses time to plan on how best to put the increase into effect without harming either valued workers or customer service.

Streamline Administrative Procedures

AB 2509 makes several changes to California's Labor Code affecting worker rights, remedies, procedures, and enforcement of state labor laws. The new law streamlines some administrative procedures for enforcing state labor laws and increases civil penalties for various violations. Some of the provisions of AB 2509 include the following: unpaid wages will accrue interest at the rate of 10% as provided by Civil Code section 3289, rather than at the rate provided by the Revenue and Taxation Code; employers will have to post a bond to appeal an Order, Decision, or Award of the Labor Commissioner to the Superior Court; employers will not be entitled to attorneys' fees in suits for minimum wage and overtime, but will still be entitled to fees in suits for other wages and fringe benefits; employees will be entitled to a penalty of one hour's pay if their employers do not provide them with a meal or rest period; and employers must keep records showing the individual piece rate units earned by individual employees.

Overturn ADA Rulings and Apply Stricter Disability Rules Under FEHA

AB 2222 revises the definitions for "mental disability," "physical disability," and "medical condition" for purposes of the Unruh Civil Rights Act and the Fair Employment and Housing Act (FEHA). The bill also limits an employer's ability to require medical or psychological examinations, or to make certain medical or disability-related inquiries. Most importantly, AB 2222 amends the FEHA, making it much more protective of employees than the ADA. Last year, the United States Supreme Court held that the determination of whether a person has a disability under the ADA must take into consideration mitigating or corrective measures, such as medication or eyeglasses in determining a person's ability to participate in a "major life activity." See Sutton v. United Airlines, 527 U.S. 471 (1999); Murphy v. United Postal Services, 527 U.S. 516 (1999); Albertson's Inc. v. Kirkingburg, 527 U.S. 555 (1999). (See Employment Law Commentary, July 1999.) AB 2222 makes clear that under California law the determination of whether a person's ability to participate in major life activities must be made without regard to corrective measures.

Prohibit Use of State Funds to Discourage or Encourage Unions

AB 1889 prohibits public agencies or private-sector recipients of state funds from using public funds to discourage or encourage unionization efforts by their employees. AB 1889 applies to all public agencies in California, to recipients of state grants, and to contractors who receive more than $50,000 in state funds. A contractor who violates the law is liable for a civil penalty of $1,000 per employee per violation. This bill is based on several federal laws, including the Job Training Partnership Act and the National and Community Service Act, which prohibit the use of funds appropriated under those programs to assist or deter unionization.

AB 1889 is very similar to AB 442, which was passed by the Legislature last year but vetoed by Governor Davis. However, AB 1889 contains a few key differences: it prohibits the use of funds to discourage or encourage unionization, rather than only prohibiting the discouragement of unionization; it does not require every state funds recipient to file quarterly reports detailing the expenditure; it does not provide for violators of the provision to be barred from receiving state funds for three years; and it does not provide for a mandatory hearing by the Labor Commissioner.

Establish Resource Network to Enforce Cal/OSHA

AB 1599 authorizes the Department of Industrial Relations to redirect previously approved budget dollars to establish a health and safety resource network to help prevent injuries and deaths of young workers. More specifically, the bill requires the Department to contract with a coordinator to establish a statewide resource network that provides Cal/OSHA training to the person at each school district who issues work permits to minors, to ensure that that person is informed on child labor laws, health and safety regulations, sexual harassment, and other types of discrimination. The bill provides that this information must also be provided to the pupil, the pupil's parent or guardian, and the employer, who shall sign a statement that he or she has read the information. In addition, section 2 of the bill authorizes the Department to contract for assistance with local district attorneys to enforce existing criminal laws when the intentional violation of health and safety laws results in a child's death.

Make Employees Personally Liable for Harassment

AB 1856 expressly provides that employees of any entity covered by the California Fair Employment and Housing Act (FEHA) are personally liable for their acts of harassment, regardless of whether their employer knows or should have known of the sexual conduct and fails to take immediate and appropriate corrective action. AB 1856 was passed in direct response to the decision in Carrisales v. Dept. of Corrections, 21 Cal. 4th 1132 (1999), in which the California Supreme Court held that a non-supervisory employee cannot be held personally liable under the FEHA for sexually harassing a coworker. Under AB 1856, employees are now personally liable for harassment.

Exempt Computer Software Professionals from Overtime Compensation

SB 88 provides for the exemption of professional employees in the computer software field from the requirement of overtime pay. In order to be exempt under SB 88, an employee must be primarily engaged in work that is intellectual or creative and requires the exercise of discretion and judgment, the employee must be highly skilled, and the employee's hourly rate of pay must not be less than $41.00. Before AB 60 was enacted last year, hourly-paid computer professionals could be exempt from overtime pay. However, the current Labor Code now only exempts those "administrative, executive, or professional and other classes of salaried employees" who receive a "monthly salary." Computer professionals paid on an hourly basis, therefore, are not eligible for the professional exemption under the Labor Code. SB 88 restores the exemption from overtime pay requirements if the hourly wage is not less than $41 and other criteria are met.

Provide Right to Inspect Employee Personnel Records

SB 1327 provides that every employee has the right to inspect his or her own personnel records. In 1993, because of budget constraints, the Legislature repealed the statutes which required public state and local employers to provide employees with access to their personnel files. SB 1327 restores the right to inspect personnel files to all public employees and replaces the various statutes that give certain employees access under current law, with a standard provision that exists in one place in section 1198.5 of the Labor Code. SB 1327 also expands the law on personnel files in four ways: (1) it gives all employees the ability to place materials in their own files; (2) it limits outsiders' access to those files; (3) it extends these rights to employees of the State of California, cities, and special districts; and 4) it requires private employers to permit their employees to inspect their own files with no loss of compensation.

Protect Personal Information

SB 129 creates the Office of Privacy Protection within the Department of Consumer Affairs (DCA) in order to ensure that private and public entities protect the privacy of personal information. SB 129 provides that the Office must protect the privacy of individuals' personal information in a manner consistent with the California Constitution, which states that all individuals have an inalienable right to pursue and obtain privacy. In carrying out its mission, the Director of the DCA must: (1) receive complaints from individuals concerning the compilation, use, or disclosure of personal information and provide advice, information, and referral where available; (2) provide information to consumers on effective ways of handling complaints that involve violations of privacy-related laws, and refer those complaints to local, state, or federal agencies where appropriate; (3) develop information and educational programs to foster public understanding of privacy issues; (4) investigate and assist in the prosecution of identity theft and other privacy-related crimes; and (5) assist and coordinate in the training of local, state, and federal law enforcement agencies regarding theft and other privacy-related crimes.

Award Employee Interest and Costs in Indemnification

SB 1305 provides that an employee in an indemnification action against an employer shall be awarded interest and costs, including attorney's fees. This bill amends section 2802 of the Labor Code, which establishes the right of an employee to be paid by his or her employer for necessary work-related expenses and losses. Current section 2802 does not explicitly address whether the employee is entitled to interest or costs. As a result, the case law interpreting section 2802 was split on the issue of whether an employee can recover costs and attorney's fees in an action for indemnification. In O'Hara v. Teamsters Union Local No. 856, 151 F.3d 1152 (9th Cir. 1998), the Ninth Circuit held that fees are recoverable under this section. However, in Jacobus v. Krambo Corp. , 78 Cal. App. 4th 1096 (2000), a California Court of Appeals court specifically rejected the holding in O'Hara and held that fees are not recoverable. SB 1305 codifies the earlier holding of the O'Hara decision and establishes the right of an employee to be awarded all interest and costs, including attorney's fees.

Require Employers to Report Information on Independent Contractors

SB 542 significantly reforms California's failing child support program by creating a new Department of Child Support Services (DCSS) as the single state agency responsible for overseeing and managing the state's child support enforcement program. SB 542 is intended to restructure the state program to significantly increase accountability and responsibility for the program and to maximize the collection and delivery of child support. Among its provisions, SB 542 requires employers to report the earnings information of independent contractors to the Employment Development Department (EDD) for inclusion in the New Employee Registry or a similar registry.

Under existing law, employers are required to report certain information on every newly hired employee to the EDD for purposes of child support collection. SB 542 amends section 1088.8 of the Unemployment Insurance Code, effective January 1, 2001, so that employers will also have to report specified earnings information on all independent contractors. The information that must be reported includes: the name and social security number of the independent contractor; the name, telephone number, and identification number of the employer; and the date and amount of the contract or payments to the independent contractor. The new reporting obligations require employers to report information to the EDD within 20 days if: (a) they make payments that equal or exceed $600 in any year to an independent contractor; or (b) they enter into a contract or contracts with an independent contractor providing for payments that in the aggregate equal or exceed $600 in any year. The information obtained by the EDD is only to be released for the purpose of establishing, modifying or enforcing child support obligations.

Vetoed Bills

Prohibit Electronic Mail Surveillance

SB 1822 would have prohibited employers from monitoring employee e-mail or computer files without first obtaining a signed or electronically verified agreement with employees explaining the employer's policy on monitoring computer records or e-mail messages. Governor Davis vetoed the bill because he said that the bill placed unnecessary obligations on the employers and would likely lead to litigation by employees over whether the required notice had been provided and whether it was read and understood by the employee.

Protect Jobs of Janitors

SB 1877 would have protected the jobs of janitorial workers when building owners change janitorial service contractors. It would have required that a successor contractor continue to employ the janitors already working at a site for at least 90 days, and then offer them continued employment if their work performance was satisfactory. Governor Davis vetoed it on the grounds that it sets a troubling precedent in regulating private sector employment relationships, but suggested that he might support a more limited version of the bill.

Increase Unemployment/Disability Insurance

SB 546 would have increased unemployment benefits by 65 percent without any reforms to mitigate the cost impact. The increases, which totaled $1.76 billion by 2003, would have led to an increase in the UI tax rate for employers. Governor Davis vetoed the bill, noting that without raising the taxable wage base or tax rates, the increase in benefit costs would place the solvency of the UI Fund at risk.

Increase Workers' Compensation

SB 996 would have increased the cost of workers' compensation by $2.7 billion without comparable savings through program reform. Although he vetoed the bill, Governor Davis commented that he recognizes that workers' compensation benefits need to be increased and that he would be interested in a bill that pays for the increases with savings found elsewhere in the system.

Establish Alternate Base Period for Unemployment Benefits

AB 2477 would have required the Employment Development Department to establish an alternate base period for workers who are otherwise ineligible to receive unemployment insurance benefits because of insufficient earnings. The bill would have required the Department to request wage information regarding the new claims and would have a new $250 penalty imposed on employers who did not supply the new information within 10 days. Governor Davis vetoed the bill, on the grounds that it is overly expansive and imposes additional and substantial administrative costs to calculate the new alternate base period on both the state and employers.

Videotape Lie Detector Tests

SB 1854 would have required that any lie detection or polygraph testing conducted by an employer be videotaped upon the employee's request. SB 1854 would have also required the employer to allow the employee or the employee's agent to view the videotape. The employer would also have been required to retain a copy of the videotape for a period of one year. The bill was intended to establish a means of providing clear evidence of whether the tests were administered properly. Governor Davis, however, vetoed the bill on the basis that the expense to the state and other employers of purchasing all of the necessary equipment and showing each applicant his or her videotape could be significant, while the benefits to the applicant would be negligible.

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Copies of these bills may be obtained from any of the lawyers listed in the side bar or from the editor.