New Requirements for New Hires
California has passed new legislation (the Wage Theft Protection Act), effective January 1, 2012, that imposes new requirements on employers with respect to new hires. Specifically, California Labor Code Section 2810.5 will require that employers disclose certain information to employees “at the time of hiring” in the form of a written notification. The specific requirements are outlined below:
What Information Must be Disclosed to New Hires?
Labor Code Section 2810.5 requires employers to provide written notice to employees “at the time of hiring” of the following information:
1. the employee’s pay rate and basis for pay rate (e.g. salary, commission, hourly, etc.);
2. allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;
3. the regular payday designated by the employer;
4. the name of the employer, including any “doing business as” names used by the employer;
5. the physical address of the employer’s main office or principal place of business, and a mailing address, if different;
6. the telephone number of the employer;
7. the name, address, and telephone number of the employer’s workers’ compensation insurance carrier;
8. and other information the Labor Commissioner “deems material and necessary” (nothing further has been designated by the Labor Commissioner to be included in the new hire notices at this time)
What if There Are Changes or Modifications to the Information Contained in the Notice?
- If any changes are made to the above information, employers must provide notification to the employee within seven days either by including the updated information on the employee’s next pay statements or in a separate written form. Thus, for information that typically appears on an employee’s wage statement (i.e. pay rate), an amended notification form does not need to be issued as long as those changes appear on the employee’s next wage statement. For changes in other information, such as the name and address of the employer’s workers’ compensation carrier, which is generally not included on wage statements, an amended notification form would have to be provided to the employees.
- The Labor Commissioner has indicated that it will be creating a sample notification form as well as a FAQ sheet to assist employers in complying with the law, which will be available on the Division of Labor Standards and Enforcement website in mid-December.
Which Employees do the Notification Requirements Apply To?
- The new law applies to all non-exempt employees hired on or after January 1, 2012 so these notifications do not need to be provided to current employees.
- Section 2810.5 does not apply to employees who are exempt from overtime laws or employees covered by a valid collective bargaining agreement if their regular rate of pay exceeds California’s minimum wage by at least 30%, and if their overtime compensation is paid at the proper premium wage rate. Despite this exception, it is good practice to provide this notice to all new hires for two reasons: 1) To avoid disputes over whether the notice was due in the event employees classified as exempt later claim they were misclassified; and 2) as for union employees, not all employees are eligible to become union members immediately upon hire and would thus not fall under this exception. The fact that they may eventually become union members is immaterial, because Labor Code 2810.5 requires that the notice be provided “at the time of hiring.”
- Although not required by the law, a copy of this new hire notice should be kept in each employee’s personnel file in case there is ever a dispute regarding compliance with this requirement.
- Finally, although some information addressed in the written notice is already contained in the workplace posters mandated by other laws, Section 2810.5 does not change any of those posting requirements.
What Are the Disclosure Requirements Each Pay Period?
California Labor Code Section 226 requires that employers provide accurate itemized wage statements to each employee semimonthly or at the time of each payment of wages. This is not a new requirement, but ensuring that accurate wage statements are provided to employees will also help employers meet the notification requirements set forth under the new legislation described above. Section 226 requires that the following information be included on employee wage statements:
1. gross wages earned;
2. total hours worked by the employee (this requirement does not apply to employees who are salaried and exempt from payment of overtime);
3. the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis;
4. all deductions (i.e. taxes, medical insurance, etc.), provided that all deductions may be aggregated and shown as one item;
5. net wages earned;
6. the inclusive dates of the period for which the employee is paid;
7. the name of the employee and the last four-digits of his or her social security number or an employee identification number other than a social security number;
8. the name and address of the legal entity that is the employer; and
9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee
- A copy of the wage statement and record of the deductions must be kept by the employer for three years at the place of employment or at a central location within the State of California
What Should Employers do to Ensure Compliance with the New Notification Requirements?
Employers should be working diligently to prepare notification forms so that they are ready to be distributed to any new hires as of January 1, 2012. It is also a good idea to take this opportunity to review itemized wage statements to ensure they are in compliance with California law.