Wage Theft Act

Authors: Anne K. WilsonLi-An C. Leonard

Author: Li-An C. Leonard and Anne K. Wilson

The Wage Theft Protection Act of 2011 added some new statutes and amended several existing ones to provide additional protections and rights to employees under California law.  For example, existing law requires employers to post specified wage and hour information in a location where it can be viewed by employees. Effective January 1, 2012, newly enacted California Labor Code section 2810.5 adds to existing law by requiring employers to provide non-exempt employees, at the time of hire, with a written notice specifying:

  • The rate of pay and the basis (i.e., hourly, salary, commission, piece, etc.), including any rates for overtime; 
  • Allowances, if any, claimed as part of the minimum wage (i.e., meal or lodging allowances)
  • The regular payday designated by the employer;
  • The employer's name, including any "doing business as" names used by the employer;
  • The employer's physical address or principal place of business, and a mailing address, if different from the physical address;
  • The employer's telephone number;
  • The name, address, and telephone number of the employer's workers' compensation insurance carrier; and 
  • Any other information the Labor Commissioner deems "material and necessary."

If any of the information in the initial notice changes, employers must notify each affected employee, in writing, within 7 calendar days of making the change. Such notice may be given by one of the following methods:

  • Providing a written amendment to the statement; Issuing an entirely new notice; or Paycheck stub, if the updated information is contained on the paycheck stub.

The new law also requires the Labor Commissioner to develop and make available a template for employers to use to comply with the new notice requirement. The Labor Commissioner's template is available on the DLSE website. In addition, the DLSE posted a list of Frequently Asked Questions regarding California Labor Code section 2810.5 and the template issued by the DLSE.

The Labor Commissioner determined that the following information is "material and necessary" and must also be included in the notice to new employees:

  • The employer's form of business;
  • Whether the employer uses another company to hire employees or administer wages or benefits and, if so, information identifying such company;
  • The form of employment agreement (i.e., oral or written); and
  • Information identifying the workers' compensation insurer (including the policy number) or, if the employer is self-insured for workers' compensation, the "Certificate Number for Consent to Self-Insure."

In addition to the new notice requirements discussed above, the Wage Theft Protection Act of 2011 also increases the length of time employers are required to maintain payroll records from two to three years and increases the penalties for violating certain wage statutes and orders. Furthermore, employers may not prohibit employees from maintaining a personal record of the hours they worked or the piece-rate units they earned. The Wage Theft Protection Act of 2011 also makes it a misdemeanor for an employer to willfully fail to pay a final court judgment or final order issued by the Labor Commissioner for wages due a former employee.


How the New Law May Affect You

Effective January 1, 2012, all non-exempt new hires must be provided with written notice of their rate of pay and the basis (e.g., hourly, salary, commission) at the time of hire. No notice is required for public employees, employees who are exempt from the payment of overtime (i.e., exempt employees), or employees who are covered by a collective bargaining agreement and make 30 percent more than the minimum wage. (However, if an employee claims to be "misclassified" as an exempt employee, there may be a dispute over whether this notice should have been provided at the time of hire. Accordingly, employers may want to consider providing this notice to exempt employees as well.)

Although the DLSE template and FAQs provide guidance with respect to the obligations of employers under the new law, they also raise at least one concern of which employers should be aware. Specifically, the template requires employers to specify whether they have an oral or written employment agreement with the new employee. More often than not, employers do not have a written employment agreement with their non-exempt employees. However, it is not uncommon for employers to have employees sign various documents or agreements as a condition of their employment, such as an at-will employment acknowledgment, an arbitration agreement or a confidentiality and nondisclosure agreement.

Consequently, instead of identifying the form of employment agreement as either oral or written, we suggest you modify the template to reflect what terms of employment may be in writing. For example:

Some of the terms of your employment are in writing such as your at-will employment relationship as evidenced in the Acknowledgment you signed when you received our Employee Handbook.

In addition, you signed a Confidentiality and Nondisclosure Agreement agreeing to protect our trade secrets and proprietary information.

Of course, any modification should reflect the names of the actual documents or agreements signed by your new employees at the time of hire.

In addition to modifying the template as discussed above, you should review your new-hire training materials and employee handbooks and make appropriate revisions to conform to this new notice requirement. You should also determine how any notice regarding future changes will be communicated to your employees.

Furthermore, given the increase in penalties, you should also review your current wage and hour practices to ensure you are in compliance with current wage statutes and orders. In addition, you should review your record retention policies to ensure you are maintaining your employment-related records for the applicable period of time.

 

 

California Employment Law Update is a publication of Duckor Spradling Metzger & Wynne's Employment Law Group.
The information contained in this publication is not intended to be and should not be construed as legal advice or opinions. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations.
© Duckor Spradling Metzger & Wynne, A Law Corporation 2012
All Rights Reserved.

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