Some post-election gallows humor has already begun to circulate.
“California Employer. . . Isn’t that an oxymoron now?”
“If I get a good lobbyist to get my business on the Federal Endangered Species List can we preempt the California Labor Code?”
The answer to both questions is negative. However, the reality is that the California election results are unlikely to signal that “Happy Days Are Here Again” for California employers. A brief summary of why the immediate future may be bleak is in order.
Governor-elect Brown ran an underfunded campaign against an opponent with enormous personal wealth, much as former Governor Davis did in the primaries during his election. In both instances, significant campaign funding for the eventual winner came from organized labor. The Governor, of course, appoints the California Labor Commissioner, the Industrial Welfare Commission, and the head of the Department of Fair Employment and Housing among others, including judges, for the next four years. None of that is encouraging, but it also is not new.
The legislature returns overwhelmingly democratic and labor friendly. Unlike prior years, the passage of Proposition 25 permits the legislature to pass a budget with a simple majority vote which the democrats will have for at least two years. Unlike his predecessor, Governor-elect Brown will not need to bargain as much with the legislature or his opponents and is far less likely to veto social/labor endorsed bills. Thus for example, the recently defeated marijuana initiative could easily re-appear as a superficially more moderate measure to provide employment protections for so-called medical marijuana users in the work place.
Separately, California is as fiscally challenged as ever. The Employment Development Department, after years of massive unemployment benefits payouts and underperforming employment tax receipts, is in dire straits. State Fund which provides a significant share of workers’ compensation coverage is in no better shape. Under the prior Governor and then Attorney General Brown, an entity known as the Economic & Employment Enforcement Coalition was aggressively pursuing what it called the “underground economy,” but which often was focused on small business legal compliance and re-classifying independent contractors. There is no reason to believe this form of revenue enhancement through enforcement will abate. Quite the contrary, although the legislature can pass a budget by simple majority, an actual tax increase still requires the same two-thirds vote that has proven so illusive in recent years.
In sum, California is broke, trending populist left at the polls and riding a staggeringly high wave of unemployment. Whether Governor-elect Brown will insist on spending cuts as opposed to revenue enhancement remains to be seen . . . at least in theory.
Don’t Reach for the Cal-WARN Act Notices Quite Yet
As challenging as this appears to be, the reality is that businesses operating with employees in California do so for reasons other than a friendly business climate. Assuming that, after the predictable revisitation of that reason, it still makes sense to be here, it’s time for those with employees in California to get busy shoring up processes and risk management measures. Among the items high on the list should be:
- Critically assess the exempt status of your first level supervisors under California law pertaining to both duties and compensation—all that right-sizing over the past two years may have had unintended consequences;
- Also assess the exempt status of those whom you thought, at least at one time, were administratively exempt;
- Examine your temporary employee and vendor relationships for compliance purposes; the enforcers want you not the service provider;
- Evaluate the level of joint employer risk posed by your vendor and independent contractor relationships . . . before EDD does;
- Get serious about the rest and meal period actual compliance and, in particular, comparing policy to reality as operations have evolved;
- Make an empirical assessment of who your California employees might be and factor in temporary assignments, contract labor, telecommuters, and those you dispatch from elsewhere to perform on-site services;
- Revisit your technical compliance with the existing uniquely California employment requirements.
The Least You Can Expect
It is well beyond the scope of this Alert to forecast all that is to come. It may also be the case that the state of the jobs and financial picture will temper rather than encourage more expansive employment regulation. Nonetheless, the following bills would be law now but for the veto of a governor whose party will not be in power much longer and there is no reason to believe the measures will not be re-introduced:
AB 482 which would have prohibited use of consumer credit reports in conducting background checks. This bill was passed and vetoed three years in a row.
AB 1881 which would have changed the liquidated damages imposed for failure to pay minimum wages when due from one times the underpaid amount, to two times the underpaid amount. Thus, if an employer underpaid the minimum wages by $1,000 the liquidated damage amount assessed would have increased an additional $2,000 had this been enacted.
AB 2187 which would have added criminal penalties and civil restitution obligations for an employer who failed to pay wages due within 90 days of a resignation or termination.
AB 2340 which would have prohibited employers from discharging, disciplining, or discriminating against employees inquiring about, requesting, or taking up to three days of bereavement leave upon the death of a spouse, child, parent, sibling, grandparent, grandchild, or domestic partner.
SB 903 which would have extended the statute of limitations for the Department of Labor Standards Enforcement to bring an action to collect a penalty or fee from one year to three years.
SB 1370 which would have required that all employees paid on a commissioned basis be engaged pursuant to a written contract.
Now more than ever the focus should be on anticipatory compliance. Although California’s population may not be growing, its population of plaintiff’s class action lawyers has not shrunk.