California Adopts “Wage Theft Prevention Act” Imposing New Notice Requirements and Penalties on Employers

Last week California Governor Jerry Brown signed into law the “Wage Theft Prevention Act of 2011” (AB 469). The new law, which takes effect January 1, 2012, is modeled on a similar New York law that took effect earlier this year.

The new law amends the California Labor Code in several important respects. Of immediate interest to employers is the new Labor Code Section 2810.5, which requires an employer to provide each new nonexempt employee with a written notice at the time of hire containing all the following information:

(A) The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable.
(B) Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances.
(C) The regular payday designated by the employer in accordance with the requirements of the Labor Code.
(D) The name of the employer, including any “doing business as” names used by the employer.
(E) The physical address of the employer’s main office or principal place of business, and a mailing address, if different.
(F) The telephone number of the employer.
(G) The name, address, and telephone number of the employer’s workers’ compensation insurance carrier
(H) Any other information the Labor Commissioner deems material and necessary.

The law requires the Labor Commissioner to prepare a template and make it available to employers who can use it to comply with the notice requirements. If an employer changes any of the required information, the employer must notify its employees of the changes within seven days, either by providing a new notice or by including the new information on a timely issued wage statement.

Although the notice requirements apply only to nonexempt employees, employers should consider providing the notice to all employees to avoid disputes over whether the notice was due in the event that employees who were classified as exempt later claim they were misclassified.

The notice requirements do not apply to public employees or to employees covered by valid collective bargaining agreements who earn at least 30% more than the state minimum wage.

In addition to the new notice requirements, the new law also contains several provisions that increase existing penalties and/or create new penalties. These include the following:

● A new Section 200.5 is added to the Labor Code increasing from one to three years the time in which the Division of Labor Standards Enforcement may commence an action for civil penalties.

● Section 1197.1 of the Labor Code is amended to provide that in addition to being subject to a civil penalty, an employer “or other person acting either individually or as an officer, agent, or employee” who causes less than the minimum wage or statutorily required overtime wages to be paid to any employee shall also be subject to paying restitution of wages to the employee.

● Section 1197.2 is added to the Labor Code making it a misdemeanor for any employer who has the ability to pay, but willfully fails to pay, a final court judgment or final order issued by the Labor Commissioner for all wages due to an employee who has been discharged or who has quit, within 90 days of the date that the judgment was entered or the order became final. Upon conviction the employer can be fined up $20,000 and imprisoned for up to one year for each offense.

Employers should take immediate steps to implement the new notice requirements for all new hires beginning January 1, 2012. In addition, employers who have not recently audited their wage and hour practices should consider whether this might be a good time to do so. Employers based outside of California that have employees working in California are reminded that California has a host of wage and hour statutes and regulations that go above and beyond the requirements of the Fair Labor Standards Act (FLSA).

Aaron Buckley and Fred Plevin – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

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