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Labor law update: what's new for 2006 and how to make sure you're in compliance.

A report by the California Labor Workforce Development Agency,, reveals that 477 labor and employment laws were passed by the California Legislature and signed by former Gov. Gray Davis from 1999-2003. In those years, many employers felt like employment regulation was changing every 10 minutes and they questioned whether or not California was the right state in which to do business.

By contrast, 2005 marked a second year of split political control between the Legislature and Gov. Schwarzenegger, and an apparent awareness in Sacramento that California needs to retain employers. There were much fewer labor laws both passed by the Legislature and signed by the governor in 2005.

The most significant new laws that California businesses need to educate themselves on for 2006 follow.


California Government Code Sec. 12950.1, enacted last year as AB 1825, requires employers with 50 or more workers to provide a minimum of two hours of anti-harassment training and education to all supervisors by Jan. 1, 2006.

Compliant training that has occurred since Jan. 1, 2003, will count toward the requirement.

Training must be repeated every two years and new supervisors must complete the training within six months of attaining a supervisory position.

Under this statute, "employer" includes those who regularly employ 50 or more persons or regularly receive the services of 50 or more persons providing services pursuant to a contract, or any person acting as an agent of an employer, directly or indirectly. Count independent contractors, agents and temporary workers among those who fit the above description.

The training must be interactive and presented by trainers with knowledge and expertise in the prevention of harassment, discrimination and retaliation, and they must give practical examples in their instruction.

The program must provide information and guidance about:

* Federal and state laws that prohibit sexual harassment;

* Procedures and methods to prevent and correct sexual harassment, discrimination and retaliation; and

* Remedies available to victims of sexual harassment.

Employers who have not yet conducted the training should schedule it now. If your in-house human resources personnel do not have the required level of experience with these issues to deliver a compliant program, hire outside human resource professionals or lawyers who do.

While the statute states neither training nor the failure to train will "in and of itself" eliminate or create liability, a plaintiff's counsel will argue to a jury that non-compliant employers should be punished for not doing their part to prevent the sexual harassment their client alleges.

Compliant employers want to tell a jury that they did all they reasonably could to avoid, detect and correct sexually harassing behavior. Also, California Supreme Court precedent provides a defense against lawsuits by employees who failed to complain about alleged sexual harassment early so they could avoid further alleged mistreatment.


California Labor Code Sec. 226 has for many years required employers to give employees an itemized statement along with each paycheck that contains the basis for wage earnings and all deductions. With an eye toward curbing identity theft, an amendment to the statute last year required that full Social Security numbers could no longer be used after Jan. 1, 2008.


Because the statute still required use of complete Social Security numbers before that date, employers were blocked from trying to protect employee Social Security numbers by using partial or alternative numbers. It also created a Labor Code violation for employers who wanted to comply early.

SB 101, effective July 21, 2005, fixed that inconsistency. Employers may start using the last four digits of Social Security numbers, or use new or existing alternate employee identification numbers, on the paystubs.


AB 1093, effective Jan. 1, 2005, amends Labor Code Sec. 213 to permit employers to pay an employee's final "paycheck" via direct deposit as long as the employee authorized direct deposit for paychecks and the payment is made within the time required by other provisions of the Labor Code. This new amendment makes lawful a practice in which some employers already engage.

Labor Code Sec. 201 still requires, among other things, that all wages earned, including unused accrued vacation days, be paid at the time of discharge if the employer terminates or within 72 hours if the employee quits.


Existing law requires that an employee in the computer software field be exempt from the requirement that an overtime rate of compensation be paid if the job entails primarily high-level functions and the worker is paid the hourly rate set each year by the California Division of Labor Statistics based on California Consumer Price Index data.

AB 1093, effective Jan. 1, 2006, amends the Labor Code Sec. 515.5 exemption criteria to require that the employee be paid either the hourly rate or the annualized full-time salary equivalent of that rate, provided that all the other requirements for exemption are met and that in each work week the employee receives not less than specified hourly rate per hour worked. The hourly rate in 2005 is $45.84; the hourly rate for 2006 will be $47.81.

Employers who classify their computer professionals as exempt should review the job function requirements for overtime exemption, which still include that the employee is:

* Engaged, more than 50 percent, in work that is intellectual or creative and that requires the exercise of discretion and independent judgment;

* Primarily engaged in duties that consist of one or more of the following:

Application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

Design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; and

Documentation, testing, creation or modification of computer programs related to the design of software or hardware for computer operating systems;

* Highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming and software engineering.


AB 48 would have raised California's hourly minimum wage from $6.75 to $7.25 starting July 2006 and to $7.75 starting July 2007. It also would have automatically adjusted the minimum wage upward each year starting Jan. 1, 2008, based on the prior year's rate of inflation.

In his veto message, the governor acknowledged the need for a higher minimum wage, but he disagreed with an "autopilot" increase. Agreement on a California minimum wage increase between the Legislature and governor seems likely in 2006 and be effective sometime in 2007.

Congress also seems likely to again address the issue of raising the current $5.15 federal hourly minimum wage. California employers still must pay employees the higher of the state and federal minimum wage rates, and California's rate historically has been higher. Yet, a federal wage rate increase could make other states, which will continue to try to lure California manufacturers and other large employers of hourly wage workers, look less attractive.


AB 1734, effective Jan. 1, 2006, amends Labor Code Sec. 512 to exempt, under certain conditions, motion picture and broadcasting industry employers from Labor Code Sec. 227(a)'s meal period requirements and non-compliance penalties.

The conditions are that employees must be covered by a valid collective bargaining agreement that provides for meal periods and includes a monetary remedy if the employee does not receive a meal period. Time will tell whether unions will attempt to bargain for more onerous meal period rules and penalties with some employers.


Every employer is required by federal law to verify whether its employees have the legal right to work in the United States within three business days after an employee's employment begins. To accomplish this, employers must have employees fill out the Department of Homeland Security, U.S. Citizenship and Immigration Service Form I-9 and provide the employer certain identity and right-to-work documents listed in the form.

Starting Jan. 1, 2006, all employers must use the USCIS revised Form I-9 dated "05/31/05." Prior versions of the form are acceptable before that date. The new form can be found at


Trying to stem consumer fraud and identity theft, effective June, 1, 2005, new regulations (16 C.F.R. 682, et.seq.) issued pursuant to the 2003 federal Fair and Accurate Transactions Act amendments to the Fair Credit Reporting Act that require employers to shred or burn paper, and permanently erase hard drives and other computer memory devices, before disposing of documents and files containing personal information.

This applies to all employers, regardless of size. Examples of personal information are Social Security numbers, home addresses, phone numbers, certain background check information and information received from a consumer reporting agency such as credit data.


Employers may have a bit of a breather compared with prior years. Smart employers will catch up with prior legislative changes as well as new changes that are industry specific and many 2005 court decisions beyond this article's scope.

Employers should consult with professionals to guide them through the maze of employment regulation, update personnel policies and practices, and manage their workplaces to avoid or reduce the chances of employee claims.


Mark E. Terman, Esq., is the partner in charge of Reish Luftman Reicher & Cohen's employment law practice group and a member of the CalCPA Human Resources Sub-Committee of the Statewide MAP Committee. He is past chair of the CalCPA Education Foundation Employment Practices Conference. You can reach him at
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Title Annotation:EMPLOYMENT LAW
Author:Terman, Mark E.
Publication:California CPA
Geographic Code:1U9CA
Date:Dec 1, 2005
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