California's Wage Theft Prevention Act (AB 469) became effective on January 1, 2012. The law created new, detailed disclosure requirements that employers must provide to newly hired nonexempt employees. The California Division of Labor Standards Enforcement ("DLSE") promulgated a template for use by employees, but several aspects of the template prompted questions and objections from employers. On April 12, 2012, the DLSE for the second time since January 1 revised the template and updated its list of Frequently Asked Questions ("FAQs") concerning compliance with AB 469.

Newly added Labor Code section 2810.5 requires employers to provide to each newly hired nonexempt employee in California a written notice stating the employee's rate(s) of pay, the basis for the pay (hour, shift, day, week, salary, etc.), any allowances claimed as part of the employee's wages, the payday, and the name and address of the employer at the time of hiring. Employees who are exempt from payment of overtime pay and many (but not all) employees working under collective bargaining agreements need not be provided with the notice required by AB 469.

In connection with the new law, the DLSE released a series of FAQs in January 2012, along with a template "Notice to Employee" ("Notice") for employer use. On April 12, 2012, the DLSE again revised its template and updated the FAQs to provide additional information. A copy of the revised template and FAQs can be accessed via this link.

The revised FAQs address questions regarding information that must be included on the Notice:

  • The Acknowledgment of Receipt section of the template is optional. If an employee refuses to sign the Notice, an employer can note the refusal on the employer's copy of the Acknowledgement.
  • The Rate of Pay section must identify each method of pay calculation, so that employees who earn an hourly regular rate of pay and a commission are notified of both methods of payment.
  • The Rate of Pay section must include a specific description of an overtime calculation, which can include a minimum overtime rate, using multipliers of 1.5 and 2.0 times the employee's hourly rate of pay. However, if an employee earns additional pay, such as commissions, that information must also be included. For example, if an employee earns $9.00/hour, plus commissions and a nondiscretionary bonus, the FAQs note that the Rate of Pay section may read: "Overtime Rate: At least $13.50/hour (1½ times regular rate) & $18.00/hour (double time rate), subject to upward adjustment based upon earned commissions (10% of sales) and bonus (2% of department gross sales)."
  • The Notice must be provided at the "time of hiring." This date may be determined by the employer and employee, as long as it is no later than the employee's start date.
  • Employers no longer need to designate the employment agreement as either written or oral. However, if there is a written employment agreement that provides the rate(s) of pay, the Notice must state whether all rate(s) of pay are included in the written agreement.

The FAQs also address several new questions regarding whom to list as the Hiring Employer and whether to issue a replacement Notice:

  • An employer must identify on the Notice its full formal legal name, including its entity designation (e.g., Inc., Co., Corp., LLC, etc.). It also must list any other name it is doing business as (the "dba"). A "dba" can be a fictitious business name or any informal names, which may be very similar to or completely different from the full, formal legal name.
  • Employers do not need to issue a new or replacement Notice to employees who previously received the earlier version of the template unless there are changes to the information previously provided. If there are changes, an employer must provide Notice that complies with the new template within seven calendar days of the change.

Finally, the new FAQs address several questions related to staffing agency situations:

  • Staffing agencies include temp services, leasing companies, and PEOs. Staffing agencies that hire employees must provide the Notice to employees and check the box for "staffing agency," even if the work is performed at (or for) another business. Recruiting services and payroll processing services are not staffing agencies for purposes of this checkbox.
  • When a staffing agency is the hiring employer, it must also state "the other entity for whom [the] employee will perform work," or the business entity to whom employees are leased if the staffing agency has such information. As long as the staffing agency provides this information, the business for which the employees perform work is not required to provide a separate Notice.
  • If a staffing agency knows where employees will be placed, it can provide information regarding all of these employers on the initial Notice. Alternatively, the staffing agency must comply with Labor Code section 2810.5 and provide notice of each new employer in another writing required by law within seven calendar days of the new placement or on a pay stub furnished in accordance with Labor Code section 226. Finally, a staffing agency can also provide the information by providing a new Notice for each new subsequent worksite placement.

It remains unclear from the FAQs and the language of Labor Code section 2810.5 whether a company using employees hired by staffing agencies must separately provide Notice to workers who perform work for them. First, a company that leases employees may retain control over their hiring, arguably bringing that employer within the statute. Additionally, FAQ 29's conditional language suggests that if a staffing agency does not identify the entity for which work is being performed, that entity must provide the information.

Conclusion and Recommendation

Any employer with employees in California should review carefully the revised form and FAQs. In particular, employers must be very careful in completing the form. The required disclosure of overtime rates of pay should be completed as described in the FAQs. Employers should not attempt to combine the required disclosures with other documentation; the DLSE has clearly stated that the Notice must be a stand-alone document whether the employer uses the DLSE form or the employer's equivalent form. The form must be completed in the language the employer normally uses to communicate employment-related information to the employee. If the employer develops its own form, it must contain all of the information required by the DLSE's template (the DLSE states that the Acknowledgement of Receipt portion of the form is optional). We do not recommend that employers provide this form to employees who were already on the payroll prior to January 1, 2012.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.