Over the strong objections of the California Chamber of Commerce, legislative majorities in bothhouses of the Legislature havepassed seven “job killer” bills along for consideration in thesecond house. The Senate has passed three “jobkiller” bills and stopped two. The Assembly has approved all four “job killer” bills that survived the committee process.
From Senate to Assembly
Receiving Senate approval and due to be considered next in the Assembly are:
• SB 935 (Leno; D-San Francisco)Minimum Wage. The bill unfairly increases employer costs by increasing the minimum wage to $13 by 2017 and then increased thereafter according to the Consumer Price Index.
Automatically indexing the minimum wage to inflation, as SB 935 proposes, has always been troubling to the business community because it fails to take into consideration other economic factors or cumulative costs to which employers may be subjected. Employers are already facing significant cost increases over the next several years, including higher taxes under Proposition 30, increased workers’ compensation rates, loss of the federal unemployment insurance credit, increased energy costs, and increased health care costs associated with the implementation of the Affordable Care Act. There will undoubtedly be other costs employers are struggling with in2018 when SB 935 seeks to tie the mini- mum wage increase to inflation. These unknown costs, coupled with an unknown economy at that time or thereafter, create concern and uncertainty for businesses.
Moreover, 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.
SB 935 passed the Senate, 21-12, on May 29.
• SB 1021 (Wolk; D-Davis) Split Roll. SB 1021 discriminates against commercial property through split roll by allowing a school district to impose a higher parcel tax against commercial property as opposed to residential property.
SB 1021 seeks to redefine the term “special taxes that apply uniformly” to mean special taxes that may be applied discriminatorily and unfairly.
Notably, there is nothing in SB 1021 that would prevent the school district from imposing both a parcel tax based upon use, as well as a parcel tax based upon square footage, thereby allowing a district to impose layers of taxes against commercial versus residential property.
The risk of multiple, non-uniform, targeted taxes against unpopular taxpayers is exacerbated by the provision of SB 1021 that allows the district to treat multiple parcels the same if the parcels are contiguous or owned by the same owner(s).
The increased cost to commercial property owners that SB 1021 would create will ultimately harm other taxpayers in the district, including residential property owners who are not the direct target of the parcel tax imposed. SB 1021 passed the Senate, 21-15, on May 5.
• SB 1188 (Jackson; D-Santa Barbara) significantly increases product defect litigation and associated claims by allowing consumers to pursue claims after the warranty has expired for “material” omissions regarding the product that are unrelated to any health and safety concerns.
The expansion of liability promoted by SB 1188 would render warranties absolutely meaningless, as all manufacturers and sellers would have to ensure the everlasting lifetime of a product. This guarantee will drive up costs for manufacturers and sellers, resulting in higher prices for consumer products. In addition, by expanding product defect litigation, SB 1188 would overwhelm the judicial branch, which already is struggling to maintain services due to three years of severe budget cuts.
SB 1188 passed the Senate, 21-14, on May 28.
From Assembly to Senate
The four “job killer” bills that passed the Assembly and will be considered next in the Senate are:
• AB 1522 (Gonzalez; D-San Diego) Increases employer mandates by requiring all employers, large and small, to provide all employees in California with paid sick leave. AB 1522 also threatens employers with statutory penalties, as well as litigation for alleged violations.
In opposing AB 1522, the CalChamber notes that although many employers voluntarily offer sick leave for full-time employees, expanding that benefit to mandate paid sick leave for temporary, seasonal and part-time employees will create a huge burden on employers. The bill also creates a private right of action for employees and unions, thereby dramatically increasing an employer’s risk for legal fees and costs. The CalChamber has raised other concerns as well.
Given the cumulative costs and existing protected leaves of absence with which California employers already are struggling, California should refrain from implementing new mandates such as AB 1522. Rather, California should incentivize employers to offer these additional benefits by reducing costs in other areas—such as providing an exemption from daily overtime or a tax credit—so employers have the capacity to offer paid sick leave.
AB 1522 passed the Assembly, 52-23, on May 29.
• AB 1897 (Hernandez; D-West Covina) Contractor Liability. AB 1897 unfairly imposes liability on any contracting entity for the contractor’s wage and hour violations, lack of workers’ compensation coverage, and/or failure to remit employee contributions, despite the lack of any evidence that the contracting entity controlled the working conditions or wages of the contractor’s employees.
The CalChamber has pointed out that the bill would unfairly hold liable the overwhelming majority of employers in California for the wage-and-hour violations of another employer that they could neither control nor prevent.
Under AB 1897, a business which contracts with a delivery company for packages to be picked up and dropped off could be held liable for the delivery company’s wage-and-hour violations or lack of workers’ compensation coverage while on the third party’s property, despite the fact that the business inter- acted with the delivery person for only a limited time each day, and neither knew nor had the opportunity to engage and prevent any violations from actually occurring. Unbeknownst to the third party business, the employee picking up or dropping off the packages could be working past his/her required 30-minute meal period, or could be working over his/her eight hours, neither of which the third party business knew or controlled. Under AB 1897, however, the third party business would unfairly be held liable for these violations. Such an expansion of liability to innocent parties is simply unreasonable and unprecedented.
AB 1897 passed the Assembly, 51-23, on May 29.
• AB 2416 (Stone; D-Scotts Valley) Unproven Wage Liens. The bill creates a dangerous and unfair precedent in the wage-and-hour arena by allowing employees to file liens on an employer’s real or personal property, or property where work was performed, based upon alleged-yet-unproven wage claims.
The CalChamber pointed out that AB 2416 will cripple California businesses by allowing any employee, governmental agency, or anyone “authorized by the employee to act on the employee’s behalf” to record liens on an employer’s real property or any property where an employee “performed work” for an alleged, yet unproven, wage claim. This bill would also severely disrupt commercial and personal real estate markets in this state.
AB 2416 passed the Assembly, 43-27, on May 28.
• AB 2617 (Weber; D-San Diego) Interference with Arbitration Agreements and Settlement Agreements. AB 2617 unfairly prohibits the enforcement of arbitration agreements or pre-litigation settlement agreements that require the individual to waive their right to pursue a civil action for the alleged violation of civil rights.
The CalChamber argued that AB 2617 interferes with state and federal arbitration laws and likely is preempted. More- over, courts already provide adequate protection for arbitration agreements, which are an effective and efficient means to resolve claims.
AB 2617 passed the Assembly, 49-25, on May 28.
‘Job Killers’ Stopped
The two “job killer” bills that failed to pass the Senate are:
• SB 1132 (Mitchell; D-Los Angeles) would have significantly limited in-state energy development by imposing a statewide moratorium on well stimulation treatments until the completion of a scientific study, thereby placing California businesses at a disadvantage, increasing fuel costs, impeding job growth and suppressing property, income and excise tax revenues.
SB 1132 fell short of votes needed to pass the Senate, 16-16, on May 29.
• SB 1372 (DeSaulnier; D-Concord) threatened to significantly increase the corporate tax rate on publicly held corporations and financial institutions up to 15% according to the wages paid to employees in the United States, and threatened to increase that rate by 50% thereafter, if the corporation or institution reduced its workforce in the United States and simultaneously increased its contractors.
As a tax measure, SB 1372 required support from two-thirds of the Senate. It failed, 19-17, on May 28.