2012 is Just Around the Corner…Credit Reports, Continued Insurance Premiums, Criminal Penalties, and Commission Contracts – Oh My!
Posted October 24, 2011

Governor Brown has been busy the last few weeks: a number of bills affecting private (and, in some cases, public) employers have been signed this month. Among the most important are:


This highly controversial bill restricts the situations in which an employer may obtain a credit report for an applicant. Previously, an employer was permitted to obtain a credit report on any applicant if the proper disclosures were provided. Now, an employer may only obtain a credit report in connection with applications submitted for eight categories of positions, and the employer must still provide the requisite disclosures prior to ordering the credit report. For most private employers, the most relevant categories are:

  1. Managerial positions (as defined by the statute);
  2. A position for which the information contained in the report is required by law to be disclosed or obtained;
  3. A position that involves regular access to all of the following types of information of any one person: bank or credit card account information; Social Security Number; and date of birth (one example of such a position would be a Human Resources Manager);
  4. A position in which the employee will be a named signatory on the employer’s bank or credit card account and/or authorized to transfer money or enter into financial contracts on behalf of the employer; and
  5. Positions with access to information that meets the legal definition of “confidential” or rises to the level of a “trade secret.”


This sister set of legislative bills require employers to continue paying its portion of group health insurance premiums for employees out on pregnancy disability leave regardless of the number of employees. They also formally declare what employers already know: it is an unlawful employment practice for an employer to interfere with, restrain, or deny an employee’s right to take family/medical leave. Employers are not required to provide coverage to employees that do not have it in place when leave is requested and do not have to pay any more of the premium than they would otherwise be paying if the employee was not on leave. Should the employee fail to return from leave as scheduled, an employer may recover the premiums paid during the leave only if the failure to return from leave is for any reason other than another family/medical leave.


This bill alters multiple provisions of the Labor Code relating to employees’ wages and adjudicated wage claims. Among the most critical are the following:

  1. It is now a misdemeanor to willfully fail to pay a final court judgment or order of the Labor Commissioner for wages due;
  2. The Department of Labor Standards Enforcement now has three years instead of one to begin a collection action against an employer who fails to pay statutory penalties or fees;
  3. The Labor Commissioner can now require an employer convicted of multiple, successive wage violations (or that fails to satisfy a judgment) to maintain a bond for 2 years (instead of 6 months) and provide an accounting of assets on request;
  4. At the time of hiring, employees (subject to certain exceptions) must be provided with written notice of their pay rate and basis and notice of any changes to this information must be provided to the employee within 7 days of the change; and
  5. Farm Labor contractors are now required to include the name and address of the legal entity that secured the employer’s services on the employees’ itemized wage statements.


By January 1, 2013, all employers utilizing employment contracts that incorporate commission payments must create a written contract and specifically detail the method by which the commissions will be calculated and paid. Previously, only employers who had no permanent and fixed place of business in California were required to do this. A breath of employer-friendly air: AB 1396 also repeals the provision of the Labor Code that subjects an employer to triple damages for violating this rule (but does not preclude damages entirely).

Watch our Seminars page for information about upcoming "2012 Employment Law Update” seminars!