Retail Detail: All California Employers, Including Retailers, Are Required to Issue New Wage Notices to Employees As Of January 1, 2012

On October 9, 2011, Governor Brown signed the Wage Theft Protection Act (Assembly Bill 469). Beginning January 1, 2012, the Act requires California employers (including retailers) to provide certain prescribed notices to all new hires, including their rates of pay, the employer's name and address, and workers' compensation carrier. (The Act is summarized in our October 13, 2011 California Labor and Employment Legislation Alert). Retailers doing business in both California and New York should note that there are key differences between the California and New York statutes.

The Act itself does not include any specific penalties against employers who fail to provide the required notice. There is currently uncertainty and speculation over enforcement and penalties. Employees who do not receive the information could potentially try to seek penalties under California's Private Attorneys General Act ("PAGA"), which provides for penalties of $100 per aggrieved employee for an initial violation, and $200 per aggrieved employee per pay period for each subsequent violation. Employers will argue that the violation is curable, and if cured, will preclude a PAGA action. Employers may also argue that employees cannot allege a PAGA violation for failure to provide the new notice because PAGA exempts certain violations related to postings and notices. Nevertheless, any class or collective action making such claims under PAGA would certainly be costly for the employer, even if the employer prevailed.

The legislation directed the California Labor Commissioner to prepare and promulgate a template notice form for employers to use so that employers can comply with new Labor Code Section 2810.5. Specifically, the law provides that at the time of hiring, the employer must provide written notice to each employee concerning:

• The employee's rate or rates of pay and the basis thereof (e.g., hourly, salary, commission), including any applicable overtime rates;
   
• The regular payday designated by the employer;
   
• The name, address and telephone number of the employer, including any "doing business as" names used by the employer;
   
• The name, address, and telephone number of the employer's workers' compensation insurance carrier;
   
• Any other information the Labor Commissioner deems "material and necessary."
   
• In addition, employers must provide written notice of changes in any of the above information within seven calendar days.

On December 29, 2011, the Division of Labor Standards Enforcement ("DLSE") issued the much anticipated template notice. A day later, the DLSE released Frequently Asked Questions (FAQs ) on the new notice. The following week, the DLSE retracted the original FAQs and posted revised FAQs on its website here. The new template notice, available in both Word and PDF formats on the Department of Industrial Relations' web site, here, creates certain new and significant obligations for retailers.

Concerns Raised by the DLSE Template

Because the DLSE did not issue its template notice until a few days before the law was scheduled to go into effect, many retailers designed their own notice forms as the January 1 effective date drew near. Those employers will now need to modify their forms to reflect the additional information the DLSE now requires. Unfortunately, the DLSE template goes significantly farther than the statute.

The new information that the DLSE added to the statute's list of eight items raise additional concerns. For example:

• If the worksite employer uses any other business or entity to hire employees or administer wages or benefits, a challenge will be reaching agreement on which entity is responsible for giving the notice and making the necessary information available. The DLSE template requires details far beyond the statute.
   
• The DLSE's template pertaining to overtime rate also raises questions. California overtime has two rates - time and one-half the regular rate of pay or double the "regular rate." "Regular rate" may not be readily calculable because it may include bonuses and commissions that vary from pay period to pay period.
   
• The DLSE also expanded its template to require the workers compensation insurance carrier's address, telephone number, policy number or, if self-insured (Labor Code 3700), certificate number for consent to self-insure. This poses a problem because some retailers whose workers' compensation insurance programs utilize a third party administrator may desire to have employees contact the third party administrator, not the insurance carrier, for help with a claim.
   
• Possibly most perplexing is the DLSE's request that employees "check the box" to identify whether their employment agreement is written or oral. Most employment agreements are a complex mix of both written and oral components.

In addition, employers should probably include an at-will reminder on the form. One example of how employers may modify the form is to add the following language: "The agreements on your pay are written agreements, and this notice confirms that your employment is at-will, meaning that either you or (the Company) can end the employment relationship at any time, without or without cause or notice."

The FAQs Provide Some Answers

The DLSE's FAQs do provide some helpful guidance, such as:

• Employers can use their own notices, as long as they contain all of the required information.
   
• Non-English templates are available on DLSE's website in Spanish, Chinese, Korean, Vietnamese and Tagalog. https://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html
   
• Employers may provide the notice with other materials that are presented at the time of hire, but in the DLSE's opinion the notice must be on its own form. The DLSE believes employees should not be required to piece together the notice information from several separate documents or pages of a manual.
   
• Employers may provide the notice electronically, but the electronic system must allow for acknowledgement of receipt.
   
• An employee may refuse to sign the notice, which simply signifies receipt. Employers should retain proof of delivery if an employee refuses to sign.
   
• Where there are multiple wage rates, the employer needs to put them all on the notice (e.g., shift differentials, different piece rates).

Retailers should evaluate carefully whether to use the DLSE template or modify and customize it while still providing all of the information the statute requires.

Customize, Customize

"One size fits all" rarely works in the world of employment law. Feel free to contact us for individualized advice on how your company can comply with Labor Code Section 2810.5, while still protecting its own interests.

By: Ann Marie Zaletel and Dana Howells

Ann Marie Zaletel is a Partner in the firm's Los Angeles - Century City office and Dana Howells is a Senior Counsel in the firm's downtown Los Angeles office. If you would like further information, please contact Ann Marie at azaletel@seyfarth.com or Dana at dhowells@seyfarth.com.