Employment Law Update

February 23, 2006

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HUMAN RESOURCES: Basics For Your Small Business

By Kyle Kring and Monica Sanchez

As a small business owner, you will quickly become aware that California’s employment laws are among the toughest in the nation.  As a California employer, you are subject to employment laws and regulations from both California state and federal laws.  Typically, when a federal law sets a standard, California will go beyond the federal standard, creating stricter compliance requirements for employers.  California’s labor and employment laws can be confusing, even for seasoned human resources professionals and it is advisable that you consult an attorney with any questions that you have specific to your business. 

Below you will find a list of some of the key documents that a small business should have to assist it in avoiding some of the most common compliance pitfalls that California employers encounter. 

 I.           THE WAGE ORDER

California’s Industrial Welfare Commission (IWC) regulates wages and hours for non-exempt employees by creating documents called Wage Orders.  Each of the Wage Orders is specific to the industry or occupations it covers.  There are currently 17 different Wage Orders. The Wage Orders explain basic wage and hour regulations on topics such as: hours and days of work; minimum wages; overtime; record retention; uniforms and equipment; meal periods; and rest periods. 

It is very important to understand which Wage Orders apply to your business in order to comply with wage and hour laws in California.  The IWC Wage Orders can be downloaded at http://www.dir.ca.gov/IWC/WageOrderindustries.htm Once you identify which Wage Order applies to your business you must post a copy of it in the workplace where it is available for all employees to view.

One of the most important aspects of the IWC Wage Orders is that they identify which employees are exempt from California’s overtime requirements.  Classification of employees as exempt has become a complicated task for employers and misclassification of employees can subject an owner to significant exposure resulting in payment of back wages and penalties.  California’s strict laws protecting employee rights often cannot be waived, even if an employer believes that the employee has consented.  Therefore, it is important for all employers, even though they consider themselves to be a small business, to understand and comply with all applicable California labor laws to avoid potential exposure.

II.            REQUIRED POSTINGS AND NOTICES

California state law and federal law require employers to display a variety of posters in the workplace, where employees can easily read them. For most employers, this requires that they dedicate a bulletin board for the 16 postings that are required for some employers. This includes postings for specific industries and employers with more than a specified number of employees.  In addition, employers are required to distribute notices to their employees either when they are hired or in connection with certain events, such as disability leaves.  Although these posting and notice requirements seem like a nuisance, failure to comply can be punishable by a fine, imprisonment, or both. 

A list of required postings under California law can be found at http://www.dir.ca.gov/WP.asp.  Business owners must also remember to comply with federal posting requirements, even if the law does not seem to be on point.  For example, although you must pay the California state minimum wage, (because it is higher than the federal wage), you must still display the federal minimum wage posters along with the California state minimum wage poster.  Federal posting regulations can be found at http://www.dol.gov/osbp/sbrefa/poster/main.htm.

Although this may seem complicated, don’t panic.  There are many companies devoted to providing these mandatory posters and notices to businesses in order to facilitate compliance.  So if researching state and federal websites seems overwhelming, a simple search on the Internet will reveal a list of companies who provide these posters on a one-sheet poster, and sometimes provide a fancy laminated version as well.

III.           THE EMPLOYEE HANDBOOK

Although there is no legal requirement for you to prepare an employee handbook, the absence of one will put you at a disadvantage in defending against a lawsuit based on your policies, procedures, or accusations of discrimination and harassment.  However, a poorly drafted employee handbook will also put you at a disadvantage and can also inadvertently create legal liabilities for a business.

Generally, employers may implement any lawful policy as a term or condition of employment. Employers however, must be aware that there are numerous federal and California state laws that affect the information and content that is contained in an employee handbook.

A small business should likely include the following policies in an employee handbook: 1) a statement of  “at-will” employment; 2) the company’s equal employment opportunity policy; 3) the company’s anti-discrimination and anti-harassment policy, including complaint procedures; 4) California state and federal leaves of absence, such as pregnancy disability leave; 5) policies regarding voluntary benefits, such as vacation and sick time; and 6) rules of conduct and safety.  Also note, that every employee handbook should contain an acknowledgment of receipt, where an employee can sign that they have read and understand all of the policies contained in the handbook.

As a starting point you can purchase or review employee handbook guides to assist you in creating your own employee handbook.  However, due to the complexity of California employment laws, it is advised that instead you consult an employment attorney to create the employee handbook for you, or at a minimum to review an employee handbook that you created before you distribute it to any of your employees.   

IV.          RECORDS AND THE PERSONNEL FILE

Numerous California state laws and federal laws have specific record retention periods for specific records made in or in connection with employment.  Small business owners are often confused about which records to keep, how to keep them, and where to keep them.  There are at least 7 California state and federal laws mandating different lengths of times that various employment records must be kept.  Typically, most recruitment, hiring and placement records must be kept for 2 years; payroll records should be kept for 4 years; and employee wage records must be kept for 3 years.  

Every employee should have a personnel file, which is an important source of information, especially when defending against litigation.  Employment records should be kept in individual personnel files, and because these files contain sensitive and private information, they should be kept in a locked cabinet with access controlled by a single individual.  A personnel file should include basic documents such as: an employee’s application, offer letter, signed acknowledgment of receipt of employee handbook, payroll forms, and performance evaluations including promotion and discipline.

For the most part, you can keep the majority of your records together in a file, but keep in mind that there are certain types of documents that must be kept separately.  For example, California law mandates that you establish a practice to ensure that all employee medical records and medical information will remain confidential and protected from unauthorized use.  Civ. Code § 56.20.  

Furthermore, be aware that an employee must be allowed to inspect his or her personnel file within a reasonable time after making a request. Lab. C. § 1198.5

V.           WRITTEN WORKPLACE INJURY & ILLNESS PREVENTION PROGRAM

California law requires employers to develop a written Injury & Illness Prevention Program (IIPP).  The legal duties imposed upon an employer are based upon the risk factors in a particular workplace.  Cal/OSHA has published a guide to assist businesses in developing this policy, which can be found at http://www.dir.ca.gov/dosh/dosh_publications/iipp.html.  An effective IIPP includes: 1) identification of an individual responsible for implementing the program; 2) a system for identifying and evaluating workplace hazards; 3) a system for correcting unsafe or unhealthy work practices in a timely manner; 4) workplace safety training programs; 5) a system for communicating with employees on safety matters; and 6) a system for ensuring employee compliance with safety practices. Lab. C. § 6401.7.

A full discussion of all workplace compliance issues is beyond the scope of this article. Nonetheless, the above categories are designed to assist you in evaluating whether your small business is in general compliance with California employment laws.  For more information contact Kring & Chung, LLP at www.kringandchung.com or (949) 261-7700.  It is never too late to be in compliance with California Employment laws.

This article was prepared by Kyle Kring and Monica Sanchez. Mr. Kring is the managing partner of

Kring & Chung, LLP. Ms. Sanchez is an associate at Kring & Chung, LLP’s Irvine and San Diego office. You can contact Mr. Kring and Ms. Sanchez at (949) 261-7700.

** The information contained herein is for informational purposes only and should not be relied upon in reaching a conclusion in a particular area. The legal principles discussed herein were accurate at the time this article was authored but are subject to change with time. Applicability of these same legal principles may differ substantially in individual situations. Please consult an attorney before making a decision in a particular area using only the information provided in this article.