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EMPLOYMENT LAW BULLETIN Two more employment laws which took effect at the beginning of this year are discussed below. Corporate-Owned Life Insurance: A new law bars employers from taking out corporate-owned life insurance policies on employees, with some exceptions. The law does not affect the validity of employer-purchased life insurance that is an employee benefit – only life insurance policies where the employer is the beneficiary. As of January 1, 2004, any life insurance policy purchased by a California employer to insure the life of a current or former employee who is a California resident is prohibited if the employer is the designated beneficiary. Any such policy purchased on or after January 1, 2004 is void as a matter of law. The exception to this law is that the prohibition does not apply to policies insuring the life of an employee who qualifies for the executive, administrative, or professional exemption from overtime. However, the employer must have an “insurable interest” to obtain a life or disability insurance policy that is not otherwise barred by the new law, and the employer must obtain the written consent of the insured person. An “insurable interest” means the employee’s death or physical or mental disability might cause the employer financial loss. Regarding policies which were purchased prior to January 1, 2004, these policies will become void on the next premium payment date on after January 1, 2009, but not later than January 1, 2010. An employer who has such a policy must disclose the following information to the employee, in writing, no later than March 31, 2004:
Workplace Investigations: For several years, employers have struggled with whether they have to comply with the Fair Credit Reporting Act’s complicated notice and disclosure rules when they use outside experts to investigate allegations of employee misconduct, such as harassment. This question has now been answered in favor of employers. The new Fair and Accurate Credit Transactions Act of 2003 specifically exempts third-party investigations of alleged employee wrongdoing from the complicated notice and disclosure requirements. Please note, however, that if you take adverse action against an employee in response to information contained in the investigation report, then you are required to provide the employee with a summary of the report describing the nature and substance of the investigation. However, you still do not have to disclose the sources of information (such as the identify of interviewees), used in preparing the report. Using an outside consultant to investigate allegations of sexual harassment or other type of employee misconduct is often a very good idea – particularly where the employee accused of misconduct holds a high-level position, or where the employer is a smaller company which does not have sufficient internal resources to conduct a proper investigation. Eskridge Law, Attorneys at Law, may be contacted by phone (310/792-7021), by fax (310/792-7022) or by e-mail (geskridge@ealaw.net). Please visit our web site at www.ealaw.net or www.employmentattorneys.net.
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