To assist our clients and other California employers in meeting the statutory requirements, our firm is expanding its existing training and educational services. We will offer two training options:

In-house Training
This is developed specifically for each employer. The fee for this is negotiated based on the needs of the employer. Our attorneys develop and present the training to the workforce. The training can be designed for supervisory or regular staff. Typically the training is conducted at the employer’s facility.

Group Training
This is designed to meet the statutory requirements noted above, and involves multiple employers meeting at the same location for the training session. A fee is charged per attendee with a discount provided to multiple attendees from the same employer. The training is for supervisory staff only and is conducted at a designated site away from the employer’s facility.

We anticipate that these two training options will meet the needs of our clients and other California employers. If you are interested in our In-house Training, please contact any of our attorneys to develop the appropriate training sessions. The time and location of our initial Group Training is:

The cost of this training is $200 per person. A flat fee of $900 is charged to groups of five or more from the same organization. To register, contact Ruth Svien by telephone at (916) 340-2854 or by e-mail at Admin@pkwp-law.com. Because seating is limited, RSVPs are required. We are also interested in your feedback regarding the types of training that would be beneficial to your organization. Please contact me or any of our attorneys with your ideas and suggestions.

For more information about the topic above, contact Treaver Hodson at thodson@pkwp-law.com or (916) 442.3552. To read Mr. Hodson's professional profile on the Palmer Kazanjian Wohl Perkins website, click here . Return to Top

DLSE Promises Clarification of Meal Period Requirements

In response to a veto message by Governor Schwarzenegger in which the Governor acknowledged that there have been inconsistent interpretations regarding meal and rest periods, the Department of Labor Standards Enforcement (“DLSE”) has proposed a new regulation designed to clarify existing law regarding meal and rest periods. The proposed regulation has not yet been enacted because the DLSE is in the process of considering all comments, objections and recommendations. However, the regulation’s enactment is likely, and is a much needed step in clarifying a confusing area.

Currently, California employers must provide an employee with an uninterrupted, duty-free half-hour meal period whenever the employee works five or more hours in a shift, and two half-hour meal periods when an employee works more than ten hours. Labor Code § 512. Employees must also be provided a paid ten-minute rest period for every four hours of work. Failure to comply with the meal and rest period requirements can result in strict liability under Labor Code Section 226.7 for the employer. Specifically, Section 226.7 requires the employer to pay the employee one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided.

Although the statutory requirements appear relatively simple, they are not in practice. Employers and employees alike remain confused. Apparently the DLSE was as well, and issued conflicting opinion letters on when meal periods should be taken and when employers had complied with the statute. This resulted in increased litigation. Ultimately, many employers adopted a conservative approach by implementing policies that significantly restricted workers’ flexibility regarding meal and rest periods. Accordingly, the DLSE decided to provide clarity and guidance to its staff, employers and employees regarding meal and rest periods by way of the new regulation. The three areas of law identified by the DLSE that require clarification and are addressed by the new regulation are as follows:

First, whether the one hour of pay an employer must pay an employee for each workday in which a meal or rest period is not provided as specified in Labor Code Section 226.7 is considered a wage or penalty. If considered a wage then the applicable statute of limitations is 3 years. If considered a penalty the statute of limitations is 1 year. The new regulation expressly provides that this payment was meant to be a penalty. As a result, the one year statute of limitations would apply as opposed to the three year statute of limitations that applies to wages. This clarification is in response to the DLSE’s own conflicting opinion letters which have resulted in confusion and the increase in costly civil class-action lawsuits directed at litigating the penalty/wage issue.

In its Initial Statement of Reasons for the new regulation, the DLSE reasoned that the legislative history of Labor Code Section 226.7 clearly indicates that the payment was meant to be a penalty. Moreover, it is not common usage in the case of a labor law violation that the remedy is to pay a “wage on a wage,” as wages are paid based upon work performed. Where the employee has missed a rest period, the employee has already been paid for the missed rest period since rest periods are always on paid time; the employee has also already been paid for a missed meal period through which the employee worked. The one hour penalty is more like a waiting time penalty that is based upon the employee’s individual wage.

The second area of law requiring clarification relates to the time parameters in which meal periods can be taken. The changes are meant to allow more flexibility for employees in scheduling meal periods according to their individual needs as well as for employers in ensuring the proper scheduling of meal periods. The proposed regulation will allow employees to take their meal period at any point before the end of the sixth hour of the work period.

Previously, employees were required to take their meal period before the beginning of the fifth hour of work. In prior opinion letters, DLSE interpreted this requirement to require the employer to provide an employee with a 30-minute meal period starting no later than the fifth hour after the start of the workday. This interpretation resulted in employers being subject to penalties even where the employee’s meal period was scheduled to begin only five minutes after the fifth hour of the workday. To avoid these penalties, employers were forcing their employees to take meal periods when they did not necessarily desire to do so.

The new regulation reflects that when subdivision (a) of Labor Code Section 512 is read together with subdivision (b), the Legislature intended to create an employee right to a meal period upon working over five hours, but not to forbid the employee a more flexible window of time during which an employee could take a meal period if such meal period commences by the end of the sixth hour of work rather than the fifth hour.

Third, the new regulation clarifies how an employer can meet the requirement of providing a meal period by establishing specific criteria for employers to follow.

Employers are no longer in the position of forcing employees to take meal periods against their will. Employers are now deemed to have provided a meal period if the employer:

(i) makes the meal period available to the employee and affords them the opportunity to take it; and

(ii) posts the applicable Wage Order; and

(iii) maintains accurate time records for the covered employees.

As further protection, an employer may inform an employee in writing of his or her meal period rights and obtain a written acknowledgement from the employee of an understanding of those rights. It is enough that the employer educates its employees about their right to take the meal period, and give them the opportunity to take it if they desire.

In sum, there are several steps an employer can take to ensure that they have complied with the statute. Specifically, employers should:

1) Distribute to their employees a summary and acknowledgement of their rights under Labor Code Sections 512 and 226.7, namely their rights to meal and rest periods. Employees should sign and return the acknowledgement to management and the acknowledgement should be maintained in the personnel file;

2) Make sure to post the appropriate Wage Order in a visible location at the worksite; and

3) Make sure each employee is afforded the opportunity to take a meal period, if the employee desires, and that each meal period taken is recorded in the employee’s time record.

The text of the proposed regulation and additional information can be found at the DLSE’s website at http://www.dir.ca.gov/dlse/DLSE_whatsnew.htm.

For more information about the topic above, contact Larry Kazanjian at lkazanjian@pkwp-law.com or (916) 442.3552. To read Mr. Kazanjian's professional profile on the Palmer Kazanjian Wohl Perkins website, click here . Return to Top

Life Stranger than Fiction Can you imagine a law that provides convicted child molesters with greater employment protections than similarly situated employees who have no criminal record? Hard to imagine, but then again, life may be stranger than fiction. Most human resource professionals, managers and business owners know that in most cases it is not permissible to make employment decisions based upon an applicant’s or employee’s arrest record. Convictions on the other hand are generally free game.With limited exceptions, an employer can make employment decisions based upon an applicant’s or employee’s criminal conviction record. The distinction likely goes back to the familiar tenant of our justice system—innocent until proven guilty. But recent changes to the Meagan’s Law may have unintentionally created a level of employment protection for convicted sex offenders that does not exist for other employees. Assembly Bill 488 added Section 290.46 to the California Penal Code. It authorizes the government to supply the public with detailed information about registered sex offenders over the Internet. The information includes the names, addresses and photographs of the convicted criminals. However, the statute provides that the information is to be used only to “protect a person at risk.” It may not be used for purposes relating to insurance, loans, credit, employment, education, or housing. Employment! Additionally, the statute provides the convicted sex offender with the right to bring a civil lawsuit against any person who uses the information from the government website for a purpose other than “to protect a person at risk.” The new statute does go on to specify that it “shall not affect authorized access to, or use of, information pursuant to, among other provisions, . . . Section 432.7 of the Labor Code.” Section 432.7 is the provision that prohibits the use of arrest records in making employment decisions. On its face, however, Section 432.7 does not “authorize” most employers to do anything. Rather, it prohibits them from using arrest records. Only by implication does it authorize the use of criminal convictions. Because of this mess, a solid argument can be made that a registered sex offender has greater employment protections than an employee convicted of petty theft. Here is an example. Assume nosey employee Joe goes to the Meagan’s law website to get information on the registered sex offenders in his town or neighborhood. To his surprise he finds employee Bob was convicted of sex crimes. He later learns that employee Fred was convicted of stealing a six-pack of Pepsi from the Seven-Eleven store. Nosey Joe goes to his boss to report what he’s learned about his coworkers. The boss wants to terminate these employees, but checks first with his employment lawyer to see if there are any problems with doing so. Amazingly the boss is told it is no problem to fire Fred for the Pepsi theft, but there is some risk to firing Bob for the sex crimes. The boss is told that the information about Bob cannot be used for employment purposes and, if fired, that Bob could sue for actual damages, a penalty of three times actual damages and attorneys’ fees! The boss can only think—life is stranger than fiction.

For more information about the topic above, contact Larry Kazanjian at lkazanjian@pkwp-law.com or (916) 442.3552. To read Mr. Kazanjian's professional profile on the Palmer Kazanjian Wohl Perkins website, click here . Return to Top

Reporting Requirements for Investigations and Background Checks of Employees n 2001, the California Legislature enacted AB 655 (Wright), which amended the California Consumer Credit Reporting Agencies Act. AB 655 allowed consumers to dispute the accuracy of information in consumer credit reports; allowed identity theft victims to bring civil actions regarding debts incurred by an identity thief; and increased disclosure requirements for investigative consumer reporting agencies (“ICRA”) and the businesses who use their reports to conduct employee background checks. AB 655 created somewhat complicated reporting and verifications procedures, which raised concerns with businesses attempting to implement the provisions of the bill. Because of these concerns the author introduced AB 1068 (Wright) in 2002 to correct the problems raised by his previous legislation. Request for Information Now, when an investigative consumer report (“ICR”) is sought for employment purposes, other than for suspicion of wrongdoing or misconduct (i.e., as a background check on a prospective employee), the employer must give the subject of the report advance written notice that the report will be sought. An ICR is defined as a “consumer report in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through any means.” An ICRA is defined as any person who, for monetary fees, engages in the practice of collecting, assembling, reporting, transmitting, or communicating information concerning consumers for the purposes of furnishing ICRs to third parties, but does not include any governmental agency whose records are maintained primarily for traffic safety, law enforcement, or licensing purposes, or any licensed insurance agent, insurance broker, or solicitor, insurer, or life insurance agent. Such a report may not be procured unless the person seeking it: 1) has a permissible purpose, i.e., intends to use the information for employment purposes, which is defined as “a report used for the purpose of evaluating a consumer for employment, promotion, reassignment, or retention as an employee”; 2) has provided advance written notice that the report is being sought, the permissible purpose, and that the report may include information on the person’s character, general reputation, personal characteristics, and mode of living; 3) provides a form allowing the consumer to check a box requesting a copy of the report; 4) provides the name, address, and telephone number of the ICRA conducting the investigation; 5) notifies the consumer in writing of the nature and scope of the investigation requested, including a summary of the provisions of Cal. Civil Code § 1786.22; and 6) the subject of the proposed report has authorized the report in writing on the disclosure form. Within three days of receipt of the returned form requesting a copy, the requestor of the report must provide that copy to the consumer. The above-referenced notice must include a statement that some of the information may be generated as a result of identity theft and may be inaccurately associated with the subject of the report. Adverse Employment Action Based on ICRA Whenever employment is denied based either in whole or in part because of information in an ICR report, the user of the report must so advise the subject of the report and supply the name and address of the ICRA that supplied the report. Further, when such a denial is made either in whole or part due to information received from someone other than an ICRA, the user of the information must clearly notify the consumer at the time of the adverse action that the consumer has the right to request the reason for the adverse action. Upon receipt of such request, within 60 days of the notice by the consumer, the user must disclose the nature and substance of the information to the consumer. Background Checks When a person, other than an ICRA, conducts a background check on an individual for employment purposes through public records, that person, and any person who receives that information, must provide a copy of any public record obtained pursuant to the investigation to the subject of the report within seven days of receipt of the record. “Public Record” is defined as “records documenting an arrest, indictment, conviction, civil judicial action, tax lien, or outstanding judgment.” If the employer seeks public records, the employer should provide on any job application a box to check allowing any job applicant to waive the right to receive a copy of a public record obtained under these circumstances. An employer who takes an adverse action based on such a public record, must notify the subject of the record in accordance with Cal. Civil Code § 1786.40, and shall provide a copy of the record to that person whether or not the person earlier waived the right to receive a copy. Federal Fair Credit Reporting Act In November 2004, the Federal Trade Commission (FTC) issued final rules for the proper handling of consumer information, consumer rights and identity theft under the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACTA). These rules define the rights and responsibilities of employers who use consumer reports for employment practices, such as hiring, promotion or discipline, and went into effect on January 31, 2005. The FTC issued a set of new model notices to be furnished to users of consumer reports. These sample notices can be downloaded from the FTC’s Web site at www.ftc.gov. The new model notices contain updated summaries of rights and responsibilities. Employers should use these new summaries during their hiring and employment process. The new model notices are similar to the California ICRA requirements. For example, employers must 1) obtain written permission to obtain credit report information for employment purposes; 2) notify all employees and applicants in writing if the employer intends to take an “adverse action,” such as denying employment or promotion, based on information found in a consumer report; and (3) must provide public records that are obtained during the course of an employer’s investigation after the investigation is complete. Employers do not have to provide notice before conducting an investigation into suspected misconduct. Please note that when an employer suspects the employee of wrongdoing for violations of the law or their policies and procedures of the employer, the employer does not need to notify an employee before taking adverse action against the employee. Like California if an employer takes adverse action against an employee based on the report, the employer must give the employee a summary of the report. The summary must include the nature and scope of the inquiry, but does not have to include the identity of individuals interviewed. Employers must use caution when conducting background checks and investigations of current employees and applicants. Failure to follow the procedures described herein can result in significant liability.

For more information about the topic above, contact Heather Candy at hcandy@pkwp-law.com or 916.442.3552. To read Ms. Candy's professional profile on the Palmer Kazanjian Wohl Perkins website, click here. Return to Top

New Nonqualified Deferred Compensation Requirements Last fall, a comprehensive set of new requirements to avoid taxation of compensation deferred through non-qualified plans was added to the Internal Revenue Code in Section 409A. Plans subject to the new Section 409A include supplemental executive retirement plans and Code Section 457(f) plans. Section 409A became effective on January 1 of this year. Given the short timeline between the enactment of Section 409A and its effective date, many employers were understandably concerned with its requirements. Fortunately, in late December, the Internal Revenue Service released Notice 2005-1, providing initial guidance on how to comply with Section 409A and allowing certain grace periods for compliance. Notice 2005-1 requires all non-qualified plans to be amended by the end of 2005. However, throughout 2005, plans must be operated in accordance with the Notice and with Section 409A. The Notice also indicates that substantial additional guidance will be forthcoming during 2005. For issues not addressed in the Notice, plans should be operated based upon a reasonable, good faith interpretation of the requirements of section 409A. The currently available guidance under Section 409A falls into three general areas: i) initial deferral elections,(ii) distributions and (iii) changes to elections. Deferral Elections Generally, an election to defer compensation must be made in the taxable year before the services relating to the compensation deferred are performed. For new participants, an election may be made within 30 days of initial eligibility. Deferral elections for certain performance-based compensation must be made at least six months prior to the end of the performance period. While the new rules provide that an election must be made in the taxable year before the services are rendered, an initial grace period applies to elections made on or before March 15, 2005. Distributions To avoid immediate taxation, amounts may not be distributed from a non-qualified plan earlier than: (i) separation from service (a 6-month wait is required for distributions to key employees of publicly traded companies); (ii) disability; (iii) death; (iv) a time certain (or pursuant to a fixed schedule) specified at the date of the deferral; (v) following a change in control (subject to regulations to be issued); or (vi) the occurrence of an unforeseeable emergency. Election Changes Any delay to the originally planned time or form of distribution must be made at least 12 months before the originally scheduled distribution date. Moreover, a new distribution date must not begin until at least five years after the date that the payment would have otherwise been made (except for distributions due to death, disability or unforeseeable emergency). No acceleration of payments is permitted. Please contact us if you have a non-qualified plan that needs to be reviewed for compliance with Section 409A. For more information about the topic above, contact George Cicotte at gcicotte@pkwp-law.com or 916.442.3552. To read Ms. Candy's professional profile on the Palmer Kazanjian Wohl Perkins website, click here. Return to Top

This communication contains general information and is not intended to provide legal advice. Should you require legal advice, please seek the assistance of legal counsel. To unsubscribe to this newsletter: Click Here. © Copyright 2005 Palmer Kazanjian Wohl Perkins LLP

.