'04 employment law changes.

From an employer's perspective, former Gov. Gray Davis continued his trend of approving employee-friendly bills. Davis signed bills during the most recent session that mandate employer-provided health insurance, expand sexual harassment liability and create new causes of action to combat alleged Labor Code violations. Here are some new laws employers must comply with in the coming years.

SB 1661--PAID FAMILY LEAVE (2003 LAW)

SB 1661, the Legislature's most controversial bill during the 2002 term, allows eligible employees to receive up to six weeks of paid leave for the sickness or injury of a family member or domestic partner, or the birth, adoption or foster-care placement of a new child.

Employees cannot begin taking paid leave until July 1, 2004, and must incur one week of unpaid leave prior to taking their leave under this law.

To pay for the program, employees, depending on their income, will have up to $70 per year deducted from their paychecks beginning Jan. 1, 2004.

SB 1661 does not require employers to hold open a position for employees on this leave unless required to do so under some other law, such as the federal Family and Medical Leave Act (FMLA) or the California Family Rights Act (CFRA). Also, SB 1661 will not extend the 12 weeks of unpaid leave available to employees under FMLA or CFRA.

[ILLUSTRATION OMITTED]

Beginning Jan. 1, 2004, employers must supply a notice provided by the California director of employment development about these new insurance benefits to each employee hired on or after Jan. 1, 2004, and to employees leaving work on or after July 1, 2004, because of pregnancy, sickness or dependent care. The director of employment development should provide this notice to employers prior to Jan. 1, 2004.

SB 2--MANDATED EMPLOYER-PROVIDED HEALTH CARE

SB 2 creates a system that requires designated employers to either provide health coverage for their employees or pay a fee to a state-run insurance service that will provide coverage.

Generally, employers can satisfy this bill's requirements by providing proof of coverage for eligible employees in a Medicare insurance program; an employer-provided group health insurance policy that covers hospital, surgical and medical expenses; a union's health and welfare fund; any other collective bargaining agreement that provides for health and welfare coverage; or any employer-sponsored, group health plan covered by the Employee Retirement Income Security Act of 1974 (ERISA).

Since SB 2 is unclear as to the minimum levels of coverage (if any) that need to be provided under the above plans, it is unclear if the employer can sponsor a low-cost catastrophic injury plan that qualifies as an ERISA plan and satisfies SB 2's requirements.

As of Jan. 1, 2006, large employers (with 200 or more employees) that cannot provide such proof must contribute to the state's newly created health care program in an amount sufficient to cover eligible employees and their dependents. As of Jan. 1, 2007, employers with 50 to 199 employees must contribute to the state's program an amount sufficient to cover the eligible employee only.

Employers with 20 to 49 employees must comply with this mandate only if a health insurance tax credit passes that provides a credit of at least 20 percent of the employee's health insurance costs. As of this writing, that credit has not yet passed.

An eligible employee under SB 2 works at least 100 hours per month for the employer and has worked for the employer for at least three months.

With minimal exceptions, employers can require employees to contribute up to 20 percent of the employee's (and, if applicable, the employee's dependent's) premium. So, employers typically pay no less than 80 percent of employees' (and, if applicable, dependents') premiums.

Employers who decline to provide coverage must contribute a yet-to-be-determined, per-employee fee to cover the cost of coverage for all the state's employees (and, if applicable, their dependents). Employers unable to provide proof of coverage also must collect the employee's share of the health insurance premium and timely transmit the amount to the state. Failure to do so can result in a penalty that is double the employee's contribution.

Employers will be penalized if they attempt to circumvent SB 2 by improperly designating employees as independent contractors or temporary employees, or if they reduce an employee's hours below the 100 per month threshold, to avoid any obligations under this law. The employer can be liable to the state for double any fee that the employer would otherwise have paid.

AB 196--SEX DISCRIMINATION

This law expands the state's definition of "sex" to include "gender," which is defined as the employee's or applicant's actual sex; the employer's perception of the employee's or applicant's sex; or the employer's perception of the employee's or applicant's identity, appearance or behavior, whether or not that identity, appearance or behavior is different from that traditionally associated with the employee's or applicant's sex at birth.

The new law is unclear about how employers should handle many possible situations, such as cross-dressing, transgender, sex change and appropriate restroom selection. Employers still can require employees to adhere to reasonable workplace grooming and appearance standards.

SB 777--INCREASED WHISTLE-BLOWER PROTECTIONS

In the wake of the Enron and WorldCom scandals, additional protections for whistle-blowers under California law were expected. Until SB 777, California's whistle-blower protections only prohibited employers from making, adopting or enforcing policies that prevented employees from disclosing state or federal violations or statutory and regulatory violations to governmental or law enforcement agencies, and retaliating against an employee from making such a disclosure.

SB 777 increases these protections to include:

* Employees who refuse to participate in an activity that would violate state or federal rules, regulations or statutes; and

* Employees who exercised their right to report conduct under this law with a former employer.

Corporate or limited liability employers now also face the possibility of higher fines for violations. SB 777 doubles the maximum penalty for violations of the whistle-blower statute to $10,000.

Currently, employers defending a whistle-blower claim need to overcome, by a "preponderance of evidence" standard, that the employer did not commit an adverse action against a whistle-blower. SB 777 requires the employer to make this showing by "clear and convincing evidence"--a much higher standard.

Finally, SB 777 creates a California Attorney General-maintained whistle-blower hotline for employees to report violations of federal or state law, and violations of fiduciary duties to shareholders, investors or employees. The Attorney General then refers these matters to the appropriate government authority for possible investigation.

Employers who do not have a whistle-blower protection policy should implement one and educate their supervisors about lawfully dealing with whistle-blowing employees.

OTHER EMPLOYMENT LAW CHANGES

* AB 76--Expansion of sexual harassment law. This law makes an employer liable for harassment of its employees committed by non-employees, such as vendors or clients, if the employer knew or should have known about the harassment.

* SB 796--Private enforcement of labor code violations. Aggrieved employees can act in California Department of Labor's stead to enforce, and sue for, labor code violations. SB 796 also allows a class action-type suit where aggrieved employees can bring the suit on behalf of other current or former employees.

Aggrieved employees need not report these violations to their employers or to the Department of Labor prior to instituting a suit, so employers likely will have little or no warning before such action.

* AB 205--Domestic partner legislation. AB 205 grants registered domestic partners (RDPs) state law rights almost in parity with married spouses. Consequently, in almost all circumstances where a married spouse would have rights and responsibilities, so do RDPs.

AB 205 affects employers by nullifying any distinctions between spouses and registered domestic partners in their policies. Thus, if an employer had a policy whereby employees were not allowed to supervise their spouses, the policy now should preclude supervision of domestic partners. Employers also should change all policies that refer to marriage to include RDPs, and train supervisors and staff to equally apply policies to married employees and RDPs.

BY DAVID A. WIMMER, ESQ. AND JEFFREY W. MAYES, ESQ.

David A. Wimmer, Esq. is a partner and Jeffrey W. Mayes, Esq. is an associate with Swerdlow Florence Sanchez Swerdlow & Wimmer in Beverly Hills. You can reach them at [e-mail] and [e-mail], respectively.