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Employers Must Act Now To Comply With The California Wage Theft Prevention Act, Which Took Effect On January 1, 2012

[January 3, 2012]  California Governor Jerry Brown recently signed into law the California Wage Theft Prevention Act (the “Act”), which imposes significant new obligations and potential penalties on employers.  Most significantly, the Act requires that California employers provide each new hire with a detailed written disclosure containing specific wage-and-hour information.

The Act went into effect on January 1, 2012, and applies to all employers with employees in California.  Thus, it is vital that California employers act now to bring their operations into compliance with the new statute.

New Hire Disclosure Requirements

Under the Act, California employers must provide each non-exempt employee (i.e., an employee who is eligible for overtime) with a written notice at the time of hire that sets forth:

• The employee’s pay rate or rates;
• Any allowances that the employer claims as part of the minimum wage rate, including 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 physical address of the employer’s main office or principal place of business, and the employer’s mailing address, if different;
• The employer’s telephone number;
• The name, address and telephone number of the employer’s workers’ compensation insurance carrier; and
• Any other information the state Labor Commissioner may deem material and necessary.

The only exceptions to this notice requirement are for certain employees.  Specifically, this notice requirement does not apply to employees who are (i) exempt from coverage under the overtime laws, or (ii) covered by a collective bargaining agreement that provides premium wage rates for overtime work and a regular hourly wage rate of at least 130 percent of the California minimum wage (which is currently $8.00 per hour).  All employers must comply with this new law with respect to all other employees in California.

Employers must also notify each employee, in writing, of any changes to the information set forth in his or her notice within seven calendar days of those changes, unless the changes are reflected on either (i) a timely wage statement, or (ii) another writing required by law that is provided to the employee within seven days of the changes.

The California Labor Commissioner has prepared a template notice that complies with the disclosure requirements of the Act.  The template notice is available for download from the website of the California Department of Industrial Relations and can be accessed via this link:  http://www.dir.ca.gov/dlse/LC_2810.5_Notice.pdf.

Other Provisions Of The Act

The Act includes a number of other important provisions.  In particular, the statute:

• Requires employers to retain copies of payroll records for at least three years;
• Extends the period of time within which the California Division of Labor Standards Enforcement may commence a wage-collection action from one year to three years;
• Requires that employers found to have paid unlawful sub-minimum wages provide restitution of unpaid wages to the affected employees, in addition to civil penalties;
• Provides for fines and potential jail time for employers that willfully fail to comply with final court judgments or Labor Commissioner orders for wages due; and
• Permits employees to recover costs and attorneys’ fees incurred in enforcing court judgments for unpaid wages.

These additional provisions of the Act underscore how important it is for employers to ensure that their payroll practices comply with all applicable laws.

Action Items For Employers

The Act became effective on January 1, 2012.  Thus, we recommend that employers operating in California immediately:

• Begin preparing to distribute the required wage-and-hour notices to new hires;
• Ask each new hire to sign and date a form acknowledging his or her receipt of the notice, and retain copies of such acknowledgement forms; and
• In consultation with employment counsel, audit payroll practices to ensure that employees are properly classified as exempt or non-exempt and are paid in accordance with applicable minimum wage, overtime and other wage-and-hour laws.

Please do not hesitate to contact us if you have questions about the new California Wage Theft Prevention Act, or about any other aspect of your wage-and-hour obligations.