California’s Newest Employment Laws
California employers always head into September with a sense of…well, to be politically sensitive, a sense of “wonderment,” as they await the governor’s pen stroke on bills passed during the just completed legislative session. When the final gavel fell as midnight rapidly approached on August 31st to end the 2019-2020 session, approximately 430 measures were slotted to be on the governor’s desk for consideration. While markedly less than the 1,000 or so bills that typically move through during sessions not marred by a pandemic, there are quite a few that have significant short term and long term implications for employers.
As the governor signs or vetoes legislation between now and the September 30th deadline, we will continue to provide updates on specific laws that will impact employment practices in California.
In our August 28th newsletter we reported in detail on AB 2257, an amendment to 2019’s AB 5 which had put significant restrictions on independent contractors. The new law, signed by the governor on September 4th, makes a number of changes to AB 5, most importantly, by establishing new exemptions. Our comprehensive article can be found on our blog https://www.employersgroup.com/blog/breaking-news-ab-2257
In this week’s newsletter we also provide a detailed analysis of AB 1867, which extends the supplemental paid sick leave benefits mandated by the FFCRA to previously excluded employers – specifically, those with 500 or more employees nationwide, certain food sector employers and employers of first responders. AB 1867 was signed into law on September 9th and becomes effective immediately.
While AB 2257 and AB 1867 have been grabbing the headlines so far, there are a number of other new laws signed by the governor thus far, including:
AB 1577 – Keeping with the pandemic-related theme, AB 1577 excludes federal CARES Act funds, such as Paycheck Protection Program loans, Health Care Enhancement Act payments, and similar programs from both federal and state income taxes and forgives the debt on them equal to the amount of the recipient’s payroll costs, mortgages, rents, and utility payments. This legislation is positive for employers that took advantage of such programs. The CARES Act had specified that PPP loans would not be considered taxable income for the purposes of federal income taxes, but could not dictate that states not consider the loans income for state taxes. The new law will protect PPP loan recipients from having to pay potentially thousands of dollars in unexpected state income tax on their forgiven PPP loans.
Signed by the governor on September 9th, the text of the bill can be found here: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1577
SB 1447 – Introduces the Main Street Hiring Tax Credit which will allow qualified businesses with less than 100 employees to get a tax credit of $1,000 against personal and corporate income taxes each year for each new employee hired or rehired between July and November of this year, with a set limit of $100,000 per business.
Also signed on September 9th, this bill further defines a “qualifying” small business as one that can demonstrate that it suffered a 50% decrease in gross receipts by comparing receipts between April 1 and June 30, 2020, with the gross receipts from April 1 to June 30, 2019. SB 1447 was immediately put into law following the signing. Businesses will have five years to claim the credit and apply it to taxes that they owe.
The full text of the bill can be found here: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB1447.
SB 115 – A budget trailer bill that features acceleration of $561 million in state bond funding in fiscal year 2020-21, including $411.5 million to advance economic stimulus with $230.5 million to help jumpstart construction projects.
Also signed on September 9th, the full text can be found here: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB115.
AB 276 – Also emerging from the need to coordinate California and Federal law governing provisions of the CARES Act, AB 276 amends California’s tax law regarding the taxation of loans from qualified employer benefit plans to employees. Previously, the non-taxable limit was the lesser of either the greater of $10,000 or 50% of the participant’s vested account balance, or $50,000, and the duration was capped at five years. With AB 276, the new maximum amount (in line with the CARES Act) is the lesser of either the greater of $10,000 or 100% of a participant’s vested account balance or $100,000. The Act also (and therefore AB 276) also provides the repayment period for such loans for up to one year.
This new law should help to avoid the potential confusion that was looming for anyone in California that had taken a loan against a qualified benefit plan as a result of challenges caused by the shutdown. It is important to note though, that the new law applies only to loans from an employer sponsored qualified retirement plan during the 180 day period beginning on March 27,2020 – meaning that the deadline for qualified loans is September 23rd.
AB 276 became effective immediately upon the Governor’s signature on September 11th, and the full text can be found here: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB276
AB 736 – Expands the professional exemption under Industrial Welfare Commission (“IWC”) Wage Orders Nos. 4-2001 and 5-2001 to include part-time, or “adjunct” faculty at private, non-profit colleges and universities in California. Both a duties test and salary test still must both be met. The duties test is unchanged, however the salary test is now modified to allow it to be met if the employee is paid either a monthly salary of two times the state minimum wage for full-time employment or is paid by the course or laboratory taught, provided that the employee’s compensation meets specific requirements contained in the statute.
Signed by the governor on September 9th, AB 736 goes into effect immediately. The full text can be found here: https://leginfo.legislature.ca.gov/faces/billStatusClient.xhtml?bill_id=201920200AB736.
AB 2143 – Provides a nuanced addition to 2019’s AB 749 regarding no-rehire clauses in settlement agreements. AB 749 specifically prohibited no-rehire clauses in settlement agreements regarding employment disputes. It was a very significant piece of legislation in part because, prior to AB 749, situations could arise in which a victim of harassment or discrimination (the “aggrieved”) could be barred from returning to the workplace if a no-rehire provision had been part of the settlement agreement. Further, in such situations, it was possible that the “offender” might still be employed at the company. AB 2143 adds a “good faith” component to the definition of “aggrieved” clarifying that it is a person who “has filed a claim against the . . . employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process.”
Conversely, AB 2143 provides an exception and allows the no-rehire provision if the employer has made a good faith determination that the aggrieved party engaged in sexual harassment, sexual assault or other criminal conduct. However, in order for this exception to apply, the employer must have documented the good faith determination before the aggrieved party filed the claim against the employer.
Signed by the governor on September 11th, AB 2143 goes into effect on January 1, 2021. The full text can be found at: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB2143.
These newly passed laws plus so much more will be covered at this year’s Employers Group Workplace & Employment Law Update on November 18 and December 8. Go here to register or to review the agenda.