California Legislation Adds New Employer Records Management Requirements

Posted on by Stephen Wu

California companies must keep track of records and information management (RIM) requirements for the generation, retention, and disclosure of various records.  It is difficult to keep track of all of them. Consequently, it makes sense to devote resources, whether internal or an external consulting firm, to match requirements to the types of records that they use.

Last year, a trio of new pieces of legislation changed RIM requirements for California employers—AB 2674, AB 1744, and SB 1255, all of which became effective on January 1, 2013. AB 1744 concerns itemized wage statements that employers must give employees.  Existing law requires them to provide periodic statements showing a list of items that includes gross wages, hours worked, deductions, net wages, pay period, and the name and address of the employer.  AB 1744 adds requirements for employers of temporary services employees. Starting on July 1, 2013, such employers must also add applicable hourly rates and total hours worked for each assignment to the wage statements of temporary services employees.

Existing law also required California employers to provide newly-hired workers a written notice concerning employment details such as pay rate, the designated payday, and the employer’s name and contact information.  AB 1744 adds a requirement that applies to temporary services employers. Their notices must include the name, physical address of the main office, mailing address, and telephone number of the entity for which the employee will perform work.  California’s Labor Commission can add additional information to this list.

Like AB 1744, SB 1255 applies to wage statements.  Under this legislation, an employee who “suffers injury” as a result of a “knowing and intentional failure” of an employer to provide accurate wage statements can seek actual damages or a statutory per-violation penalty not to exceed $4000, whichever is greater.  “Suffering injury” means the employer fails altogether to provide the required wage statement, or the employer does not provide accurate and complete statement of all of the required items.

Isolated and unintentional violations do not count as “knowing and intentional” failures. Significantly, a factfinder can consider an employer’s policies, procedures, and practices in considering whether a failure is knowing and intentional.  Thus, employers without a written policy are at greater risk, and employers can reduce their risk through robust documentation approved, implemented, and maintained by the employer.

Under AB 2674, California employers must retain a “copy” of wage statements for three years.  “Copy” means a paper duplicate or “a computer-generated record that accurately shows all of the information” required by the law. Thus, AB 2674 recognizes the reality that many employers will maintain their records in electronic form.

Employees can ask to see wage statements in writing or orally.  Employers must comply with such requests as soon as practicable, but no later than 21 days after the request.  If the employer fails to permit inspection or copying of wage statements, an employee or Labor Commissioner can seek a $750 penalty.  Employees can file actions to seek compliance and obtain costs and attorney’s fees in such an action.

AB 2674 also fleshes out a requirement for California employers to provide each employee with a right to inspect personnel records about the employee other than wage statements. The right of inspection is suspended if the employee files an employment-related lawsuit against the employer.  The suspension will last as long as the litigation remains pending.

Employers must provide personnel records to employees or their representatives within 30 days of the request.  Requests must be in writing.  For current employees, the employer must provide access to the records at the employee’s place of work.  For former employees, the employer must provide access at the location of the records. The employer and employee can agree on a different location.

Noncompliance with this law is a criminal infraction.  Also, if the employer fails to comply with the inspection requirement, the employee can file a lawsuit to seek an order to obtain compliance.  In such an action, a prevailing employee can recover costs and attorney’s fees.

The retention period for an employer’s personnel records for an employee is during the term of employment plus three years after termination.  Employers, however, will probably want a longer retention period, given that at least some employment claims will have a four-year statute of limitations.

In response to these three pieces of legislation, California employers should reexamine their RIM practices, and implement board-approved RIM policies covering employee records if they do not currently have official policies.  First, they should ensure that their wage statements and notices for new workers contain all of the required elements, particularly temporary services employers.  Second, they should ensure that they are maintaining wage statements and other personnel records for at least three years, but it makes sense to undertake an analysis of how long after that they should be maintained.  Finally, they should implement and maintain procedures to accommodate employee requests for wage statements and other personnel.  If employers are unable to establish and maintain these procedures themselves, they should seek the assistance of professionals who can help establish a compliance program.

Stephen Wu

Partner, Cooke Kobrick & Wu LLP

Stephen Wu

Shareholder, Silicon Valley Law Group

risk management legislation

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