Labor and Employment

Given the state of the economy and the desperation felt by many employees regarding the security of their job (and the anger felt by disgruntled former employees regarding the loss of their job), violence remains a real and serious threat in the workplace. Recognizing this fact, on September 8, 2011, the Department of Labor – OSHA Division – issued a new Directive aimed at providing compliance officers guidance for investigating and responding to allegations and incidents of workplace violence. OSHA has also launched a new webpage focused on preventing workplace violence.

In the Directive, OSHA points out the alarming statistics from the Bureau of Labor Statistics’ (BLS) Census of Fatal Occupational Injuries (CFOI) show that an average of 590 homicides occurred each year during the years 2000 through 2009. In fact, homicides remain one of the four most frequent work-related fatal injuries, and remained the number one cause of workplace death for women in 2009. Several studies have shown that prevention programs can reduce incidents of workplace violence. According to OSHA, by assessing their worksites, employers can identify methods for reducing the likelihood of incidents occurring. OSHA believes that a well written and implemented Workplace Violence Prevention Program, combined with engineering controls, administrative controls and training can reduce the incidence of workplace violence in both the private sector and in governmental workplaces.

What is Violence in the Workplace?

Federal law defines workplace violence as “violent acts (including physical assaults and threats of assaults) directed toward persons at work or on duty.” (Center for Disease Control and Prevention, National Institute for Occupational Health (2002).) “Occupational Hazards in Hospitals.” (DHHS (NIOSH) Pub. No. 2002-101.) OSHA has grouped workplace violence into the following four classifications which describe the relationship between the perpetrator and the target of workplace violence.[1]

Type 1 – Criminal Intent.

Violent acts by people who enter the workplace to commit a robbery or other crime – or current or former employees who enter the workplace with the intent to commit a crime.

Type 2 – Customer/Client/Patients.

Violence directed at employees by customers, clients, patients, students, inmates or any others to whom the employer provides a service.

Type 3 – Co-worker.

Violence against co-workers, supervisors, or managers by a current or former employee, supervisor, or manager.

Type 4 – Personal.

Violence in the workplace by someone who does not work in the workplace, but who is known to, or has a personal relationship with, an employee.

Assessing the Risks of Violence in the Workplace.

Many workplaces are at risk for workplace violence, but certain workplaces are recognized to be at significantly greater risk than others. OSHA identifies certain industries like healthcare, social service settings, and late-night retail, as “high-risk industries.” However, every employer should perform an initial assessment to identify workplace security factors which have been shown to contribute to the risk of violence in the workplace.

According to OSHA and Cal/OSHA, if an employer has one or more of the following factors present in its workplace, it should consider its workplace to be at potential risk of violence:

1. Exchange of money;
2. Working alone at night and during early morning hours;
3. Availability of valued items, e.g., money and jewelry;
4. Guarding money or valuable property or possessions;
5. Performing public safety functions in the community;
6. Working with patients, clients, passengers, customers or students known or suspected to have a history of violence; or
7. Employees with a history of assaults or who have exhibited belligerent, intimidating or threatening behavior to others.

Implementing a Program to Prevent Workplace Violence.

The cornerstone of an effective workplace security plan is appropriate training of all employees, supervisors and managers. According to OSHA and Cal/OSHA, employers with employees at risk for workplace violence must educate them about the risk factors associated with the various types of workplace violence and provide appropriate training in crime awareness, assault and rape prevention and defusing hostile situations. Also, employers must instruct their employees about what steps to take during an emergency incident.

Since Type 3 and 4 events are more closely tied to employer-employee relations than are Type 1 or 2 events, an employer’s considerate and respectful management of his or her employees represents an effective strategy for preventing Type 3 and 4 events. According to OSHA, some workplace violence researchers have pointed out that certain actions which are perceived by an employee as a threat to their job status and security, (e.g., layoffs or reductions-in-force, disciplinary actions including demotions or suspensions, and/or termination) can be a triggering event for workplace violence. Thus, where such adverse employment actions are contemplated, employers should conduct due diligence prior to carrying out the action to ensure it has addressed the potential for a violent reaction, and then carry out the action in a respectful manner designed to minimize the potential violence.

One important fact for employers to be mindful of is that domestic violence is a prevalent form of workplace violence. Because domestic violence spills over into the workplace, employers need to take appropriate precautions to protect at-risk employees. For instance, when an employee reports threats from an individual with whom he or she has (or had) a personal relationship, employers should take appropriate precautions to ensure the safety of the threatened employee, as well as other employees who are in the zone of danger and who may be harmed if a violent incident occurs in the workplace. One option in California is to seek a temporary restraining order (TRO) and an injunction on behalf of the affected employee. Any employer may seek a TRO/injunction on behalf of an employee when he or she has suffered actual violence (assault, battery or stalking as prohibited in the California Penal Code) or a credible threat of violence reasonably likely to be carried out in the workplace.

Reporting Workplace Violence.

Under the California Labor Code and Cal/OSHA regulations, employers have a duty to record and report certain injuries in the workplace, including those resulting from workplace violence. Labor Code section 6409.1(b) states expressly that “[i]n every case involving a serious injury or illness, or death, in addition to the report required by subdivision (a), a report shall be made immediately by the employer to the Division of Occupational Safety and Health by telephone or telegraph.” Failure to do so can result in a civil penalty of no less than $5,000. Cal/OSHA actively encourages employers to report all deaths, and/or serious injuries or illnesses that result from a workplace assault or other type of violent act so that it can acquire a fuller understanding of the scope and nature of workplace violence by conducting an investigation of the circumstances surrounding the event.

Conclusion.

By issuing this new Directive, it is clear that OSHA is focused on enforcing workplace security laws to prevent violence. Therefore, employers should take the opportunity to: 1) audit their Injury and Illness Prevention Plan (IIPP) and/or other workplace security plans to ensure they identify workplace security factors which have been shown to contribute to the risk of violence in their particular workplace; and 2) train their employees.

[1]Cal/OSHA has a similar classification system grouped into three classifications:

In Type I, the violent actor has no legitimate business relationship to the workplace and usually enters the affected workplace to commit a robbery or other criminal act.

In Type II, the violent actor is either the recipient, or the object, of a service provided by the affected workplace or the victim (e.g., the assailant is a current or former client, patient, customer, passenger, criminal suspect, inmate or prisoner.)

In Type III, the violent actor has some employment-related involvement with the affected workplace. Usually this involves an assault by a current or former employee, supervisor or manager; by a current/former spouse or lover; a relative or friend; or some other person who has a dispute with an employee of the affected workplace.

Just this week, the Department of Labor (DOL) and the Internal Revenue Service (IRS) announced they are joining together to prevent employers from misclassifying employees as independent contractors. On September 19, 2011, Secretary of Labor Hilda L. Solis hosted a ceremony at the DOL headquarters in Washington to sign a memorandum of understanding with the IRS, which allows the agencies to share information and coordinate enforcement of employers thought to be misclassifying independent contractors. Seven states also signed similar agreements, including Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah, and Washington. Hawaii, Illinois, Montana, and New York are expected to follow shortly. California is likely to sign on at some point in the not too distant future.

The reasons behind the increased scrutiny are two-fold. For one, independent contractors are ineligible for minimum wage and overtime pay, unemployment insurance, workers’ compensation and social security benefits. Second, the government does not collect employment taxes on compensation paid to independent contractors. Therefore, where misclassification occurs, federal and state governments lose out on much needed tax revenues.

What does this mean for you? It is becoming increasingly apparent that both federal and state government agencies are cracking down on the misclassification of independent contractors. Employers who contract with independent contractors should carefully examine those classifications to ensure misclassifications are not occurring. Doing so will allow employers to avoid costly consequences due to increased federal and state scrutiny.

On September 14, 2011, the California Legislature enrolled Senate Bill 459 and presented it to Governor Jerry Brown for signature. (As of the time of this post, the Governor has still not acted on SB 459.)

SB 459 was introduced by Senator Ellen Corbett to address the issue of misclassification of employees as independent contractors. Under California law, there is extensive statutory provisions that address the employee/employer relationship and provide numerous protections to employees in areas such as minimum wage, overtime and working conditions. SB 459 was introduced to prevent the misclassification of employees as independent contractors so that “true” employees could receive the protections of these statutes. SB 459 would subject employers to civil penalties of up to $25,000 per violation in the event that an employer willfully misclassifies an employee as an independent contractor. SB 459 also provides employees with a private cause of action if they suffer actual harm.

Supporters of SB 459 argue that it is necessary given the increase in the number of reported cases of misclassified employees to the California Employment Development Department. Supporters claim that employers misclassify employees in an effort to save on labor costs. Misclassification also costs the State and Federal Governments in lower revenue with regard to social security, unemployment and income taxes.

Opponents of SB 459 argue that it is poorly drafted, unfairly includes retroactive provisions, and could subject employers to lengthy and costly lawsuits arising from alleged misclassifications.

It remains to be seen whether Governor Brown will sign SB 459 into law. A similar bill was presented to then Governor Arnold Schwarzenegger in 2007 but he vetoed the legislation.

If SB 459 becomes law, employers are encouraged to review their classification of employees/independent contractors to avoid costly lawsuits and potential civil penalties.

Last September, California’s previous governor (the “Governator;” oops I mean Governor Schwarzenegger) signed into law a new statutory leave entitlement for certain employees who are going to donate their bone marrow or an organ to another.

The law was codified in Labor Code section 1510 and provided that an employer must grant a paid leave of absence to an employee who is an organ donor or a bone marrow donor. The leave of absence to an organ donor is up to 30 days in a one-year period. The leave of absence for a bone marrow donor is up to 5 days in a one-year period. The leave of absence for either donor is not a break in his or her continuous service for the purpose of his or her right to salary adjustments, sick leave, vacation, annual leave, or seniority. As a condition of an employee’s initial receipt of the leave of absence, an employer may require the employee to take a specified number of days of earned but unused sick or vacation leave, unless that would violate provisions of an applicable collective bargaining agreement.

California’s current Governor Brown signed Senate Bill 272 on August 1, 2011 in order to clarify certain provisions in Labor Code section 1510.

Those clarifications are:

1. The days of leave are business days rather than calendar days;

2. The one-year period is measured from the date the employee’s leave begins and consists of 12 consecutive months, and thus is not based on a calendar year;

3. The leave of absence is not a break in the employee’s continuous service for the purpose of his or her right to salary adjustments, sick leave, vacation, paid time off, annual leave, or seniority;

4. An employer may require, as a condition of an employee’s initial receipt of bone marrow or organ donation leave, that an employee take up to five days of earned but unused sick leave, vacation, or paid time off for bone marrow donation and up to two weeks of earned but unused sick leave, vacation, or paid time off for organ donation, unless doing so would violate the provisions of any applicable collective bargaining agreement.

Some important provisions from the original law for employers to remember are:

A. The law makes clear that organ and bone marrow donation leave is separate from an employee’s leave entitlement under the Family and Medical Leave Act (FMLA) and California Family Rights Act (CFRA). Thus, it does not run concurrently with FMLA or CFRA and an eligible employee could potentially be eligible for leave under Labor Code section 1510 and under FMLA and/or CFRA for a serious medical condition related to the bone marrow or organ donation.

B. The leave is paid leave. While Labor Code section 1510 permits an employer to require an eligible employee to use accrued and unused personal time off (PTO), vacation, or sick leave, it is important to remember that if the employee does not have any accrued and unused PTO, vacation, or sick leave, the employer must still grant an eligible employee paid leave under the statute.

C. Organ or bone marrow donor leave does not have to be taken all at once within the relevant 12 month period. Instead, an employee is entitled to the respective cumulative amount of leave (30 days for organ donation and 5 days for bone marrow donation) within the 12 month period that starts on their first day of such leave.

D. If the employee is covered by the employer’s group health insurance, the employer must maintain such coverage during the leave period pursuant to the same terms and conditions as when the employee is working.

E. Employers must reinstate employees returning from bone marrow or organ donation leave to the same position or a position with equivalent status, pay and benefits.

F. Employers must not retaliate against an employee for taking organ or bone marrow donation leave or for opposing an unlawful employment practice related to organ or bone marrow donation leave. If an employee believes they have been retaliated against for exercising their rights under Labor Code section 1510, he/she may sue to enforce his or her rights under the law.

The Third Appellate District for the California Court of Appeals recently issued a decision that provides hope for those employers who unknowingly hire undocumented workers throughout California. In Salas v. Sierra Chemical Co., the court used the after-acquired evidence and unclean hands doctrines to bar Salas’ Complaint, ruling that undocumented workers are not entitled to recourse on a wrongful failure to hire claim, where they misrepresent their lawful ability to work in the first place.

Relevant Facts:

Vicente Salas was a seasonal worker at Sierra Chemical, a swimming pool chemical business. In 2006, he injured his back while working. After returning to work for a short time on modified duty, he reinjured his back when he was re-assigned to his regular duties. Following this injury, he brought a workers’ compensation claim against the company. In December 2006, Salas was laid off as part of Sierra Chemical’s annual reduction. In 2007 Sierra Chemical contacted Salas, informing him that he could return to work, provided he could establish he had received a medical release. Salas could not produce such a release and was precluded from returning pursuant to Sierra Chemical’s policies.

Salas filed a civil complaint against Sierra Chemical for disability discrimination in violation of the FEHA and denial of employment in violation of public policy. Specially, Salas alleged: (1) Sierra Chemical failed to reasonably accommodate his disability; (2) Sierra Chemical failed to engage in the interactive process; and (3) he was denied employment as punishment for filing a claim for workers’ compensation benefits.

After filing his case, Salas filed a in limine motion with the trial court asserting his Fifth Amendment right against self-incrimination in response to any inquiry into his immigration status. Sierra Chemical then discovered the Social Security number provided by Salas to secure his employment belonged to a man in North Carolina. Sierra Chemical filed for summary judgment, arguing the after-acquired evidence and unclean hands doctrines barred Salas’s causes of action as a matter of law. Sierra Chemical argued that had they known Salas was ineligible to work in the United States, he would not have been hired, and as such, the company could not be held liable for failing to rehire him. Though originally denying the motion, the court ultimately agreed with Sierra Chemical. Salas appealed that decision.

Courts Holding:

The Court of Appeals found for Sierra Chemical, holding Salas’s lawsuit was barred on two grounds. First, under the after-acquired evidence doctrine, Salas could not bring a wrongful refusal to hire complaint where he had no right to be rehired given the company policy of refusing to hire applicants who submit a false Social Security number.

The court also found the suit was barred under the unclean hands’ doctrine. In making their determination, the court considered the nature of Salas’s misrepresentation that he was legally capable of working in the United States, the fact that the misrepresentation exposed Sierra Chemical to federal penalties for submitting false information, and the fact that Salas was disqualified from employment by means of governmental requirements. Ultimately, the court held “[b]ecause Salas was not lawfully qualified for the job, he cannot be heard to complain that he was not hired.”

Finally, Salas argued that Senate Bill 1818, a 2002 California law, precluded application of after-acquired evidence and unclean hands doctrines based on his immigration status. This argument, however, was rejected by the Court of Appeals. The court found that while current California law provides undocumented workers “all protections, rights, and remedies available under state law”, it does not expand the law to allow undocumented immigrants to maintain failure to hire claims. Rather, immigration status does not matter where any employee is prohibited from maintaining a claim for wrongful termination/failure to hire where he/she misrepresents a federally imposed job qualification.

The Effect of Salas on California Employers:

It should be noted that the Salas decision is not without limits. First, the decision explicitly precludes the use of the doctrines where pervasive discriminatory conduct harms an employee. Moreover, it is imperative the employer first establish that it is their settled policy to discharge/refuse to hire undocumented workers. This underscores the importance of employers maintaining strict policies with respect to hiring undocumented workers. However, where this can be proven, Salas helps protect employers who unknowingly hire undocumented workers.

The California Supreme Court Confirms that Companies May Delegate Some Workplace Safety Obligations to Independent Contractors

On August 22, 2011, the California Supreme Court issued its decision in Seabright Insurance Company v. US Airways, Inc. The issue before the Court was whether the Privette rule applies when the party that hired an independent contractor (the “Hirer” or “Principal”) failed to comply with workplace safety requirements concerning the precise subject matter of the contract, and the injury is alleged to have occurred as a consequence of that failure. The Privette rule essentially provides that when employees of independent contractors are injured in the workplace, they cannot sue the party that hired the contractor to do the work. (Privette v. Superior Court (1993) 5 Cal.4th 689.)

Relevant Facts from the Seabright Case.

US Airways uses a conveyor to move luggage at San Francisco International Airport. The airport is the actual owner of the conveyor, but US Airways uses it under a permit and has responsibility for its maintenance. US Airways hired an independent contractor, Lloyd W. Aubry Co. (“Aubry”), to maintain and repair the conveyor. US Airways neither directed nor had its employees participate in Aubry‘s work.

The conveyor lacked certain safety guards required by applicable Cal-OSHA regulations. An Aubry employee, Anthony Verdon Lujan (“Verdon”), was inspecting the conveyor when his arm got caught in its moving parts and he suffered severe injuries. SeaBright, as Aubry’s workers‘ compensation insurer, paid Verdon benefits based on the injury and then sued US Airways in a civil action, claiming the airline caused Verdon‘s injury and seeking to recover what it paid in workers’ compensation benefits. Verdon intervened as a plaintiff in the civil action, alleging causes of action for negligence and premises liability.

Legal History Below.

Defendant US Airways sought summary judgment based on the Privette case as well as Hooker v. Department of Transportation (2002) 27 Cal.4th 198 (Hooker). In Hooker, the California Supreme Court held that despite the Privette rule, the hirer of an independent contractor can be liable for a workplace injury of the contractor‘s employee if the hirer retained control over the contractor‘s work and exercised that control in a way that affirmatively contributed to the employee‘s workplace injury. (Hooker, at p. 213). US Airways argued that it did not “affirmatively contribute” to Verdon‘s injury and thus summary judgment was appropriate.

SeaBright and Verdon countered with a declaration by an accident reconstruction expert, who stated that the lack of safety guards at the “nip points” on the conveyor violated Cal-OSHA laws (Lab. Code § 6300 et seq. and 8 CCR §§ 3999 and 4002 [regulations governing conveyor safety]) and that the safety guards would have prevented Verdon‘s injury.

The trial court struck the plaintiffs‘ declaration insofar as it discussed causation. It found no evidence that US Airways “affirmatively contributed” to Verdon’s injury and granted summary judgment.

SeaBright and Verdon appealed. The Court of Appeal reversed the trial court holding that, under Cal-OSHA, US Airways had a nondelegable duty to ensure that the conveyor had safety guards, and that the question of whether the airline‘s failure to perform this duty “affirmatively contributed” to Verdon’s injury under the principles in Hooker was one for the jury and thus precluded summary judgment. The Court of Appeal also found that US Airways could not delegate to Aubry the tort law duty US Airlines owed to Aubry‘s employees to ensure that the conveyor met Cal-OSHA safety standards. In support of its finding, the Court of Appeal quoted a comment from a California Supreme Court decision issued some 25 years before Privette, which did not involve workplace safety. US Airways and Verdon then petition the California Supreme Court for review.

California Supreme Court’s Decision.

Whether Cal-OSHA imposes on an employer like US Airways a tort law duty of care that extends to the employees of other parties such as independent contractors is a question that remains unsettled. However, assuming that Cal-OSHA regulations do impose such a duty, the issue before the Court was whether US Airways could and did delegate to Aubry any duty it owed to Aubry‘s employees to comply with the safety requirements of Cal-OSHA, or whether such duty is nondelegable.

In analyzing this issue, the Court examined its prior cases, including the 1993 seminal Privette case. In Privette, the Court explained: “At common law, a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor‘s negligence in performing the work. [Citations.] Central to this rule of nonliability was the recognition that a person who hired an independent contractor had ‘no right of control as to the mode of doing the work contracted for.‘” (Id. at p. 693.)[1] In light of the limitation on the independent contractor‘s liability to its injured employee under the workers’ compensation system, the Court concluded in Privette that it would be unfair to permit the injured employee to obtain full tort damages from the hirer of the independent contractor.

In analyzing this issue, the Court examined its prior cases, including the 1993 seminal Privette case. In Privette, the Court explained: “At common law, a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor‘s negligence in performing the work. [Citations.] Central to this rule of nonliability was the recognition that a person who hired an independent contractor had ‘no right of control as to the mode of doing the work contracted for.‘” (Id. at p. 693.) In light of the limitation on the independent contractor‘s liability to its injured employee under the workers’ compensation system, the Court concluded in Privette that it would be unfair to permit the injured employee to obtain full tort damages from the hirer of the independent contractor.

In 1998 the Court decided Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253 (“Toland”). The Court reviewed its holding in Privette as it related to the question of whether a hirer of an independent contractor has an obligation to specify, as part of its contract with the contractor, that the contractor should take special precautions to avert a peculiar risk. The Court noted that the hirer “has no obligation to specify the precautions an independent contractor should take for the safety of the contractor’s employees” and “[a]bsent an obligation, there can be no liability in tort.” (Toland, at p. 267.) The Court also said that subjecting those who hire contractors to peculiar risk liability in such circumstances would negate the hirer’s “right to delegate to independent contractors the responsibility of ensuring the safety of their own workers.” (Id. at p. 269.) Thus, in Toland, the Court recognized the principle of delegation of duty as a rationale for its decision.

Then in 2002, the Court refined the principles from Privette and Toland in the Hooker case, holding that an independent contractor‘s employee can sometimes recover in tort from the contractor‘s hirer if the hirer retained control of the contracted work and “fail[ed] to exercise his control with reasonable care . . . .” (Hooker at p. 206.) The Court noted that its prior holding in Privette was based on the principle that the hirer of an independent contractor generally has “no right of control as to the mode of doing the work contracted for . . . .” (Hooker, at p. 213.)

Finally, in 2005, the Court issued its decision in Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659 (Kinsman).) In that case, the Court stressed the “framework of delegation” to explain its holdings in Privette, Toland, and Hooker. According to the Court, those decisions were grounded on a common law principle “that when a hirer delegated a task to an independent contractor, it in effect delegated responsibility for performing that task safely, and assignment of liability to the contractor followed that delegation.” (Kinsman, at p. 671.)

In the present case, the Court concluded that the Privette line of decisions discussed above established that an independent contractor‘s hirer presumptively delegates to that contractor its tort law duty to provide a safe workplace for the contractor‘s employees. However, one question remained: is the duty, if any, to comply with Cal-OSHA and its regulations for the benefit of an independent contractor‘s employees nondelegable? The nondelegable duties doctrine applies when the duty preexists and does not arise from the contract with the independent contractor. (See Eli v. Murphy (1952) 39 Cal.2d 598, 600 and Knell v. Morris (1952) 12 39 Cal.2d 450, 456.)

The Court noted that several courts of appeal have concluded that a hirer‘s statutory or regulatory duties constitute retained control if those duties are nondelegable. The courts disagree, however, about the effect of a breach. Some courts, like the Court of Appeal in this case, have held that the breach of a nondelegable statutory or regulatory duty can, by itself, create a triable issue as to whether the hirer “affirmatively contributed” to the injury of the independent contractor‘s employee. Other courts have held that if the breach is merely an omission, that breach alone cannot qualify as the “affirmative contribution” required for liability under Hooker.

The California Supreme Court ultimately held that the conflict between the courts of appeal is of no moment. It found that US Airways presumptively delegated to Aubry any tort law duty of care the airline had (or may have had) under Cal-OSHA regulations to ensure workplace safety for the benefit of Aubry‘s employees. According to the Court, the delegation which is “implied as an incident of an independent contractor‘s hiring” includes a duty to identify the absence of the safety guards required by Cal-OSHA regulations and to take reasonable steps to address that hazard.
Thus, the Court ultimately found that the Privette rule did apply to the circumstances presented in this case and held that neither SeaBright nor Verdon could recover in tort from US Airways on a theory that Verdon‘s workplace injury resulted from US Airway’s breach of what they claimed to be a nondelegable duty under Cal-OSHA regulations to provide safety guards on the conveyor. Hence, the Court reversed the Court of Appeal decision finding it erred in reversing the trial court, which had granted summary judgment for US Airways.

1 In Privette, a property owner hired a roofing company to install a new roof, and an employee of the roofing company was burned when attempting to carry a bucket of hot tar up a ladder. At issue was the “peculiar risk” exception to the general rule of nonliability. The peculiar risk exception allows lawsuits against those who hire contractors, if the work is “likely to create . . . a peculiar risk of physical harm to others unless special precautions are taken . . . .” (Rest.2d Torts, § 416.)

As the California Legislature reconvenes this week from its summer recess, it will be poised to advance bills that could, if enacted, impact the workplace. Among them is AB 22, which would prohibit employers, except certain financial institutions, from obtaining a consumer credit report for employment purposes. If AB 22 becomes law, employers would be able to obtain such reports only if the information sought is substantially job-related and pertains to a managerial or other sensitive position.

Under AB 22, information would be substantially job-related if the person for whom the report is sought would have access to the employer’s confidential information, money, or assets. Likewise, the position would be a sensitive one if the information contained in the report is required by law to be disclosed or to be obtained by the employer.

This is not the first time California has considered passing such legislation. In late September 2010, then-Gov. Arnold Schwarzenegger vetoed AB 482, which was nearly identical to AB 22. In his veto message, Gov. Schwarzenegger explained that he had rejected similar legislation in 2008 and 2009. That veto message also noted that AB 482 would “significantly increase the exposure for potential litigation over the use of credit checks.”

Gov. Schwarzenegger said he disfavored AB 482 because “California’s employers and businesses have inherent needs to obtain information about applicants for employment and existing law already provides protections for employees from improper use of credit reports.” Indeed, employers in the Golden State who wish to conduct background checks on prospective or existing employees must comply with the federal Fair Credit Reporting Act (“FCRA”), the California Investigative Consumer Reporting Agencies Act (“ICRAA”), and the California Consumer Credit Reporting Agencies Act (“CCRAA”). Each of these laws imposes different requirements.

For example, the FCRA applies when an employer engages an outside screening company to prepare a credit-check report concerning an individual for purposes of “hiring, promotion, retention, or reassignment of employees.” The FCRA requires, among other things, that the employer give notice and obtain written permission from the person whose credit is to be checked. The employer must also provide that person with a “pre-adverse action notice” and a copy of the background report before taking an adverse action (e.g., declining to hire the person). Under the FCRA, employers also must provide a second notice after taking an adverse action, which tells the individual how to dispute inaccurate or incomplete information.

California law is broader than the FCRA in a number of ways. For instance, the ICRAA covers employers who conduct background checks themselves and governs inquiries into a person’s “character, general reputation, personal characteristics, or mode of living” obtained through “any means.” Meanwhile, under the CCRAA, an employer may obtain a copy of a person’s credit report with that person’s written permission; however, employers may find themselves in trouble in terms of anti-discrimination laws if the report contains information about the person’s protected characteristics (e.g., the person’s age, marital status, race, or religion).

Many California employers retain the services of background screening agencies to conduct such credit or background checks. Employers should confirm that the agency they select for such tasks is familiar with both federal and California laws and up to date in terms of the status of AB 22.

The California Assembly passed AB 22 in May 2011, and the Senate Appropriations Committee is scheduled to consider the bill this week. If AB 22 passes out of committee, the full state Senate soon may be asked to send the bill to the governor’s desk. Should AB 22 advance to that stage, Gov. Jerry Brown will decide whether to veto or enact it.