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‘Job Killer’ Bills For Today: Autopilot Wage Hikes, Targeted Tax, Workers’ Comp

(April 24, 2013) Three California Chamber of Commerce-opposed “job killer” bills will be considered by legislative policy committees today.

AB 10 (Alejo; D-Salinas) Automatic Minimum Wage Increase — Unfairly increases California employers’ cost of doing business by raising the minimum wage $1.25 over the next three years and thereafter indexing the minimum wage based on inflation, which fails to take into account the current economic status of the state or other fees and costs employers are required to pay. Assembly Labor and Employment Committee hearing April 24.

SB 622 (Monning; D-Carmel) Targeted Tax — Threatens jobs in beverage, retail and restaurant industries by arbitrarily and unfairly targeting certain beverages for a new tax in order to fund Children’s health programs. Senate Governance and Finance Committee hearing April 24.

SB 626 (Beall; D–San Jose) Massive Workers’ Compensation Cost Increase — Unravels many of the employer cost-saving provisions in last year’s workers’ compensation reform package and results in employers paying nearly $1 billion in benefit increases to injured workers without an expectation that the increases will be fully offset by system savings. Senate Labor and Industrial Relations Committee hearing April 24.

AB 10

Although California’s economy is showing signs of improvement, such improvement is still at the infancy stage. An increase in the minimum wage starting in 2014 will have a negative impact on any economic recovery by either limiting available jobs, or worse creating further job loss.

Employers Face Uncertainty

Even though an initial $0.25 increase may seem minimal when viewed by itself, a potential minimum wage increase is not the only increase in costs California employers will face next year. There is significant concern amongst all employers regarding the increased costs they undoubtedly face as a result of the implementation of the Affordable Care Act.

In 2014, California employers also will lose a part of their federal tax credit due to California’s failure to repay money borrowed from the federal government for unemployment insurance benefits. This will increase the total federal tax California employers are required to pay for any employee who earns more than $7,000 per year. Additionally, the Proposition 30 increases for the personal income tax, as well as the sales and use tax, will be in full effect in 2014.

Automatic Indexing

Under AB 10, the minimum wage would incrementally increase over three years by a total of $1.25 and then, starting in 2017, would adjust according to the annual percentage of inflation as determined by the California Consumer Price Index for All Urban Consumers.

An automatic annual rise in the minimum wage according to the percentage of inflation does not take into account competing economic factors or conditions. Businesses could be suffering financially as a result of a recovering economy, such as now, or could be facing a host of increased costs, such as in 2014, and yet the minimum wage would continue to rise regardless. Notably, the proposed annual indexing under AB 10 does not allow a reduction in the minimum wage in any year during which there is deflation.

Placing the increase in minimum wage on auto-pilot is inappropriate when California has a full-time Legislature available and responsible for reviewing whether any adjustment in wages is proper given the state of the economy at that point. In fact, when enacting Labor Code Section 1178.5, the Legislature determined that the Industrial Welfare Commission should not be allowed to annually index the minimum wage, but rather should review any increase in minimum wage by composing a board of employer and employee representatives to determine whether an increase was appropriate.

SB 622

SB 622 seeks to impose a $0.01 excise tax on each fluid ounce of a bottled sweetened beverage and $0.01 of each fluid ounce produced from a concentrate from which a sweetened beverage is derived.

The intended effect of SB 622 is to deter consumers from purchasing such beverages or concentrates. To the extent this tax does alter their behavior, SB 622 will hurt the beverage industry and will force such businesses to adjust for their losses, including potential reductions in their workforce. The business community consistently maintains that if a tax is necessary, it should be only temporary and broad based so that the impact is minimized as it is shared by all instead of an individual business or industry.

New Burdens on General Fund

SB 622 would also create a new fund for the revenue received from this excise tax in order to educate, prevent and improve childhood obesity. The CalChamber is concerned with the creation of additional state programs that ultimately may rely upon General Fund revenue in order to survive. If SB 622 deters consumers from purchasing sweetened beverages, as intended, then this excise tax is a decreasing revenue source. The programs created by SB 622 will simultaneously experience a loss of funding as the revenue decreases, potentially placing more pressure on the General Fund. California has struggled over the last several years with budget cuts and revenue loss. Although the passage of Proposition 30 provided some relief, there is not necessarily additional revenue to support more programs.

SB 626

Last year, labor unions and employers came together to reform the California workers’ compensation system. The goal of this reform package was to provide injured workers with needed benefit increases, but offset these increased costs by closing certain loopholes and making the state’s workers’ compensation system operate more efficiently with fewer disputes and litigation.

Eliminates Savings

SB 626 eliminates the entire balance of the deal and would erase hundreds of millions of dollars in projected savings.

Specifically, SB 626 would roll back reforms dealing with timely, high-quality medical treatment and a more predictable – and less litigious – permanent disability system.SB 626 leaves California employers worse off than they were before the reforms. Not only will they face pre-reform escalating costs; they will be burdened by an additional $1 billion in benefit increases with no expectation that this cost will be offset by system savings. SB 626 is a giant step backwards for California employers during the current fragile economic recovery. Additionally, SB 626 reverses a bipartisan labor-employer compromise. These types of agreements between key stakeholders that enjoy overwhelmingly bipartisan approval should be encouraged and protected, not attacked and diluted.

Action Needed

Contact your legislators and urge them to oppose the “job killer” bills. Easy-to-edit sample letters are available at www.calchambervotes.com.

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