The Internal Revenue Service (IRS) has released income tax withholding information for 2018 (Notice 1036) that shows new rates for employers to use. The 2018 withholding tables reflect changes due to the tax reform legislation enacted last month. A withholding table shows payroll service providers and employers how much tax to withhold from employee paychecks, given each employee’s wages, marital status and number of claimed withholding allowances. The IRS instructs employers to begin using the 2018 withholding tables as soon as possible but no later than Feb. 15, 2018. Employers should continue to use the 2017 withholding tables until they implement the 2018 withholding tables. Once employers implement the new tables, many employees will begin to see changes in their paychecks reflecting the tax reform. The new tax law makes a number of changes for 2018 that affect individual taxpayers. The new tables reflect the:
More information on the updated withholding tables is available in the IRS’s Withholding Tables Frequently Asked Questions. W-4 Update Coming Soon The IRS is currently working on revising the Form W-4 to reflect additional changes in the new law, such as changes in available itemized deductions, increases in the child tax credit, the new dependent credit and the repeal of dependent exemptions. Until a new Form W-4 is issued, employees and employers should continue to use the 2017 Form W-4. Employees do not need to fill out a new W-4 right now — the new withholding tables are designed to work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. This, according to the IRS, will minimize the burden on taxpayers and employers. The IRS is also revising the tax withholding calculator on their website to help employees update their withholding in response to the new law or other changes in personal circumstances in 2018. The IRS anticipates this calculator should be available by the end of February. Taxpayers are encouraged to use the calculator to adjust their withholding once it is released. On the Horizon The IRS plans to help educate taxpayers about the new withholding guidelines and calculator. The effort will be designed to help workers ensure that they are not having too much or too little withholding taken out of their pay. Check out the IRS’s Resources for Tax Law Changes for more information. For 2019, the IRS anticipates making further changes involving withholding. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding. “The IRS appreciates the help from the payroll community working with us on these important changes,” said Acting IRS Commissioner David Kautter, in a statement. “Payroll withholding can be complicated, and the needs of taxpayers vary based on their personal financial situation. In the weeks ahead, the IRS will be providing more information to help people understand and review these changes.” Want to know more about deductions from wages? CalChamber members can find forms and Q&Asin the HR Library. Not a member? See how HRCalifornia can help you. Governor Edmund G. Brown Jr. this week proposed the final budget of his gubernatorial career, proposing to spend a record $190 billion without raising taxes and setting aside $13 billion in a rainy-day reserve. For the first time since 1998, it appears that a retiring governor will not pass along a budget deficit to his successor. Nonetheless, the Governor insisted that fiscal prudence must guide decisions this year, emphasizing that “we prepare for the recession, not when it comes, but years before.” The Governor noted that by the end of the next fiscal year, the economic expansion will be the longest post-war period of uninterrupted growth. A moderate recession, according to the Department of Finance, would drop state revenues by more than $20 billion annually. The day after the Governor released his budget proposal, the California Chamber of Commerce hosted Department of Finance Director Michael Cohen at a Luncheon Forum where he provided attendees with details on the proposed budget. Education With respect to education, the administration proposes fully funding the Local Control Funding Formula, a finance allocation that eliminates most categorical funding programs in favor of aiming supplemental funding toward poor students, English learners and children in foster care. Overall spending on public schools and community colleges will have increased by 66% in the seven years since the depths of the recession. In the Governor’s proposal, funding for the University of California will increase by about 2%, and for the California State University by 1%. For community colleges, the budget includes an overall increase of 4% and implements legislation from last year that waives tuition for first-time, full-time students. The budget also proposes the creation of an entirely online two-year degree aimed at working Californians. Workforce To address the state’s long-term workforce needs, the Governor proposes providing $200 million to support K–12 career-technical education programs that are aligned with industry skills, and additional funding for industry experts to support these programs. The idea is to maintain a predictable, targeted and sustained funding stream to support an industry/education workforce development collaboration. Transportation/Courts Following up on last year’s increase in transportation revenues, the administration plans to spend $4.6 billion in the next fiscal year on various highway and bridge maintenance, rehabilitation and operational improvements. The budget also includes funds to restart the state’s construction program to complete 10 courthouses. The state’s judicial branch will be provided additional funding to support efforts by the Judicial Council to improve and modernize trial court operations. Cap-and-Trade The Legislature in 2017 extended the cap-and-trade program, which is designed to enable reductions in greenhouse gas emissions, through 2030. A consequence of this extension was to stabilize the existing program and ensure a steady stream of new revenues to the state, potentially amounting to billions in new taxes for the Legislature to spend. The Governor will outline his plan for new spending later this month in his state-of-the-state address. The full summary of the Governor’s budget proposal can be found at www.ebudget.ca.gov. Last week, California businesses began to legally sell recreational marijuana in California. More than 400 state licenses have been issued so far, but the rollout may be slow. Cities or counties must first approve commercial marijuana sales, and localities can choose to ban or restrict recreational marijuana shops. On November 8, 2016, Californians voted to pass Proposition 64, also known as the Adult Use of Marijuana Act, which legalized the recreational use of marijuana for adults 21 years old and older. Although marijuana became legal to smoke on November 9, 2016 (the day after the election), licensed recreational marijuana sales were not allowed until January 1, 2018. But what about smoking weed at work? When it comes to the workplace, California employers can take a deep breath of fresh air, because the recreational use of marijuana stops at the workplace. Employer policies related to drug possession, use and impairment, as well as testing, are not compromised with the legalization of marijuana use under Proposition 64. Proposition 64 explicitly states that it is intended to “allow public and private employers to enact and enforce workplace policies pertaining to marijuana.” The initiative also provides that it will not be construed or interpreted to amend, repeal, affect, restrict or pre-empt: The rights and obligations of public and private employers to maintain a drug and alcohol free workplace or require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of marijuana in the workplace, or affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees, or prevent employers from complying with state or federal law (Section 11362.45 (f)). These provisions distinguish Proposition 64 from the failed 2010 initiative, which did not protect employer policies concerning the use of marijuana in the workplace. Therefore, even with the passage of Proposition 64, employers may continue to prohibit use, possession and impairment at work and may continue to test for use when appropriate. Proposition 64 is not intended to interfere with these workplace policies or practices. Pre-employment drug testing in California usually should be done only after a conditional job offer has been made. Otherwise workplace drug testing is usually subject to a “reasonable suspicion” test —allowing an employee to be drug tested only when specific objective facts indicate abuse. Random drug testing in California is rarely allowed; although certain industries or professions, such as transportation, have stricter drug testing requirements. Employers with concerns about recreational marijuana use will want to review existing policies and remind employees not only about the company’s drug-free workplace policy and practices but also to specify that marijuana is prohibited. Still unsure about legalized marijuana and drug-free workplace policies? CalChamber offers a free white paper on Marijuana and Workplace Policies (CalChamber members can download the white paper). CalChamber members can also view How To: Oversee Pre-Employment Drug Testing. Not a member? See how HRCalifornia can help you. The Internal Revenue Service (IRS) has issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. This year, the business rate increases one cent per mile. Beginning January 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law. Employees always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Under California Labor Code section 2802, employers must fully reimburse employees for all expenses actually and necessarily incurred. Many employers typically choose to use the IRS mileage reimbursement rate, but its use is optional. The Division of Labor Standards Enforcement has stated that using the IRS mileage rate will generally satisfy an employer’s obligation to reimburse for business-related vehicle expenses, absent evidence to the contrary. However, if an employee can show that the chosen mileage reimbursement rate, even the IRS rate, does not cover all actual expenses the employee has incurred, the employer must pay the difference. Business vehicle expenses do not include only gasoline, but also wear and tear (depreciation), repairs, oil, insurance and other costs. Members can read more about Expense Reimbursements in the HR Library. Not a member? See how HRCalifornia can help you. The National Outlook: Cruising Through Rough Waters It may be tempting to interpret the hurricanes pounding the Southeast, major earthquakes in Mexico, bigger bombs going off in North Korea, and President Trump making a budget deal with the Democrats as the four horsemen of the economic apocalypse. Yet, despite all the scary headlines, under the surface the U.S. economy is ticking along at a steady if unexciting pace. Growth came in at 3% for the second quarter of the year (the best since the first quarter of 2015), making up for a relatively weak first quarter, and the outlook for the rest of the year remains in the 2.5% range. Overall, Beacon Economics expects the U.S. economy to grow faster in 2017 than during the last two years. And the outlook for 2018 looks remarkably similar, short of some major change in government policy. Here are some of the key economic trends we expect to see over the coming months. Businesses are Investing One of the best signs for 2017 is the solid recovery in nonresidential investment. Oil prices have stabilized and production and exploration are yet again on the rise. Globally, the European Union is seeing solid growth, China has stabilized, and commodity economies have started to bounce back, fueling U.S. export growth. The ISM Manufacturing Index for August had the highest reading in six years. The European Central Bank just announced the end of its quantitative easing program and the U.S. dollar is beginning to depreciate from recent high levels, which should help maintain these trends in the second half of the year. Disaster Economics Only halfway through hurricane season, Houston is still in the midst of a major cleanup after Hurricane Harvey inflicted unprecedented damage on this enormous metropolis, and the damage Hurricane Irma wreaked on Florida is still being assessed. The human tragedy of these storms is clear, but it is a mistake to think they will have a negative impact on economic growth. In contrast, the rebuilding that occurs will actually stimulate economic growth in the short term, particularly in the residential sector as billions of dollars will be poured into fixing or replacing damaged homes. This certainly does not imply that natural disasters should be welcomed as a tool for economic stimulus—the surge in activity is driven by the need to replace destroyed capital (not to mention shattered lives). On net, we are worse off. Consumers to Rebalance While business spending is heating up, we expect consumer spending to disappoint in the second half of the year. Solid growth in consumer spending kept the economy humming through the commodity bust—but spending got ahead of incomes by a good margin. The consumer savings rate has dropped below 4% of disposable income for the first time since before the Great Recession—a very worrisome trend since overspending today can lead to future problems. Beacon Economics believes consumers are starting to rebalance their spending, at least as indicated by recent softness seen in auto and retail sales. The expectation is that savings rates will begin to drift back up throughout the rest of 2017. Even better news is that this rebalancing will occur without many “side effects” because consumer debt burdens are still near an all-time low level and the tightness of the labor markets is driving solid wage gains. Beware the Labor Shortage One of the key messages of Donald Trump’s presidential campaign last year focused on the lack of job opportunities for Americans—driven, he claimed, by bad taxes, bad regulations, and the huge number of undocumented workers in the nation. As much as that message resonated with part of the American public, it simply isn’t true. The United States was close to full employment during the campaign and now is not only at full employment, but will start feeling the pinch of labor shortages this year, particularly in relation to the recovery and cleanup efforts that will begin in the Southeastern areas of the nation affected by the recent hurricanes. The country’s headline unemployment rate is now at 4.4%—the lowest since the 1960s with the brief exception of the tech bubble-fueled economy of the late 1990s. There are a number of benefits to a tight labor market—not the least of which is rising wages for workers. This might seem like a contradiction to the vast majority of press coverage of monthly jobs data, which almost always laments the lack of income growth. But the popular press is failing to account for low inflation and certain issues with the labor survey. Once we account for these issues in the data, the picture reveals that, on average, U.S. worker wages are rising at almost the fastest rate they have in 25 years. Rising wages are pulling people back into the workforce and labor force growth is as strong as it has been in over a decade. This is a positive for discouraged workers who may have formerly dropped out of the labor force, as they will be given opportunities to receive training and experience. But the pool of “discouraged” workers is small—2 million to 3 million at most. Soon, even that reserve of workers will be gone, and in addition, the baby boomers are beginning to retire in force. The solution to this problem is the expansion of immigration, an entirely opposite stance from the one the current presidential administration is pursuing. As always, our generals continue to fight the last war—not the next one. The Trump Effect This brings us to federal policy, or perhaps the lack thereof. When President Trump entered office, he promised radical shifts in government policy. Some of those policies could have been modestly stimulating to economic growth, while others could have put the nation on a path straight into recession. This uncertainty has been a concern for Beacon Economics—if not the stock markets, which have continued their climb into the stratosphere. But despite our unease, nothing has happened at the federal level except the most basic functions of state. In many ways, the stasis currently gripping Washington D.C. looks to be a lot like what occurred under the Obama administration, with the exception that it is incompetence rather than partisanship that is now freezing the wheels of government. At this point, Beacon Economics believes the chance of a major change in policy (positive or negative) occurring is small but real. In the meantime, we’re sitting back and taking in this year’s must-watch TV—Survivor: White House. Janet’s Choice And what about equities? Banks have been slowing their lending, commercial real estate markets seem to be plateauing, there are a variety of political and global worries, and rising wages are putting pressure on profits. But despite all this, equity markets continue to break records month after month. In Beacon Economics’ view the market has become frothy—and apparently this is the view held by the Fed as well. It has continued to tighten despite the fact that bond rates have barely budged and inflation is already slowing from the very brief surge seen at the start of the year. The Fed is in a tough spot. It needs to figure out how to slow equities before they end up popping on their own with potentially dangerous consequences. Yet, to date, raising the Federal Funds rate and starting to sell off the balance sheet clearly isn’t doing the job. Confounding the issue further is the question of leadership at the Fed in 2018 when Janet Yellen’s term comes to an end. The prediction as to what the Fed does next boils down to a coin toss. California Forecast Economic Growth Limits For most of the post-recession era, the California economy has been among the fastest growing of the 50 states, both in terms of job gains and growth in economic activity. Credit for this growth trajectory has largely been attributed to high tech, which has experienced phenomenal growth since the recession. But it also was made possible by enormous slack in the labor market as the state recovered from the highest rates of unemployment seen in at least 40 years. For more than 60 months from early 2012 through mid-2016, California added jobs at roughly twice the rate as the United States. Job gains were impressive, at times exceeding 3% year-over-year, and the state gradually chipped away at its double-digit unemployment rate, which fell from 12.2% in 2010 to 5.4% in 2016. Yet, by the third quarter of 2016, that slack had been squeezed out: Instead of handily outpacing U.S. job gains, California’s growth rate slipped to just above 1.5%, putting it roughly on par with the nation. But by early 2017, slack in the labor force was wrung out as California saw its unemployment rate hit a 16-year low, effectively at full employment. Job gains continued in most industries, to be sure, but the pace of growth was much slower than in recent years. Entering the final quarter of 2017, some observers have worried that the slowdown in the labor market is a precursor to a stalling statewide economy. Not So Fast! Yes, California’s pace of job growth has slowed considerably, but not because the expansion is stalling out. In fact, the state continued to add jobs through the first several months of this year, but at a slower rate. Wage and salary jobs rose by 1.7% year-over-year in July, adding 276,300 jobs year-to-year, second only to Texas. In the private sector, the Health Care industry made the largest contribution, followed by Construction, and Accommodation and Food Services (by far the largest sector within Leisure and Hospitality). Professional Scientific, and Technical Services, the source of so much job growth in recent years, was essentially flat, as was Retail Trade. The Government sector saw a significant gain, mostly due to hiring by local governments. Otherwise, job losses occurred only in Mining and Logging and in Durable Goods. In all, growth across the state has driven the unemployment rate below 5% in recent months, to the lowest rate since 2000. Despite the slowdown in job growth, California’s gross state product continues to advance nicely, increasing by 3.1% from the first quarter of 2016 to the first quarter of this year. Taxable sales growth slowed considerably, however, advancing by just 2.7% year-to-year in the first quarter of 2017 compared to a 6.7% increase in the final quarter of 2016. With the state at full employment, job growth and general economic gains will largely be constrained by the availability of workers. This is good for workers who might achieve pay increases in the coming months and quarters, but it poses a challenge for firms that want to grow but cannot because they are unable to hire the necessary workers. Data at the national level indicates that job openings in general have reached historic highs. This holds true for most industries, from professional and business services to manufacturing to food and beverage establishments. There are shortages of skilled workers in well-paying occupations, of unskilled workers in food services and similar industries, and even of skilled and semi-skilled occupations in manufacturing and construction. What is holding back growth and can anything be done about it? There is an easy answer to the first question, but the second is a different story. Build It…They’re Already Here For decades, California augmented its homegrown labor force with workers from elsewhere, drawing from both other states and other countries. Through much of the post-World War II era, the state was a magnet for workers from around the country and the world. There were opportunities for aerospace engineers, fruit pickers, and everything in between. In the 1970s and 1980s, California’s labor force grew by an average of 3.1% per year, during which time net migration matched or exceeded California’s internal population gains. But net migration turned negative with the 1990s recession, and in turn, growth in the labor force has slowed to just 0.9% annually since 1991. Significantly, in the last decade and a half, consistent state-to-state migration out of California has been offset only by international migration into the state. It is no coincidence that slower labor force growth has occurred as the cost of living has soared in California. As recently as the mid-1970s, the median price of a California home was just a few thousand dollars higher than the national median. But since 1990, the California median has consistently exceeded the U.S. median by more than 50%, with the state median at least double the U.S. median in 10 of the last 27 years. Meanwhile, rents have reached such heights that rent burdens in many communities across the state are among the nation’s highest. Countless headlines in recent years have described California as facing a housing shortage and an affordability crisis as construction has lagged demand. This is not a new theme, just the latest chapter in California’s housing story. One need only look back to the early 2000s to find the same storylines: • The state’s need for housing far outstrips the current pace of building; • The state needs more affordable and workforce housing; • Even middle and upper middle income households face affordability challenges. Without attempting to sound trite, it all boils down to supply and demand. On the demand side, the much-anticipated arrival of Millennials on the housing scene, coupled with recent job and income growth and low interest rates, are all driving demand for housing, both owner-occupied and rental. On the supply side, existing home sales have fallen below expectations, given the strength of the economy, while new single-family and multi-family construction has been relatively weak since the recession. Demand-side solutions to the problem include easier underwriting standards (though not as slack as in the 2000s), reduced down payments, and special finance programs for would-be buyers, along with rent subsidies for qualified households. But in the absence of increased supply, these programs result in more would-be buyers/renters competing for scarce housing.
No, the situation ultimately must be addressed by increasing supply, a tall order indeed. But until California does so, in earnest, growth of the statewide economy will be constrained. That is not to say that California won’t grow. It will. The state and its regions should experience continued growth in economic activity and jobs throughout 2017 and into 2018. Most of the job gains will occur in Health Care, Leisure and Hospitality, and Construction. But California will fall short of its potential until it crafts long-term supply-oriented solutions to the chronic problem of high housing costs and low housing affordability. Cal/OSHA has issued guidance for employers and workers on working safely in conditions with heavy smoke caused by the wildfires.
Smoke from wildfires contains chemicals, gases, and fine particles that can harm health. The greatest hazard comes from breathing fine particles, which can reduce lung function, worsen asthma and other existing heart and lung conditions, and cause coughing, wheezing, and difficulty breathing. Employers with operations exposed to wildfire smoke must consider taking appropriate measures as part of their Injury and Illness Prevention Program under Title 8 section 3203 of the California Code of Regulations and as required under section 5141 (Control of Harmful Exposure to Employees). Those measures include:
Additional information is available on the Cal/OSHA website. The California Chamber of Commerce is urging businesses to participate in the upcoming workshops to discuss draft regulations for the new state-run retirement savings program, Secure Choice.
Workshops are scheduled for December 5 at the State Personnel Board, located at 801 Capitol Mall, Room 150 in Sacramento, and December 7 at the Ronald Reagan State Building, Auditorium, 300 South Spring Street in Los Angeles from 10 a.m.–noon. Individuals who cannot attend the hearings in person may provide comments by phone at (888) 278-0296, participant code: 6531748. Signed by Governor Edmund G. Brown Jr. in 2016, SB 1234 (de León; D-Los Angeles; Chapter 804), along with the original SB 1234 (de León; D-Los Angeles; Chapter 734) and SB 923 (de León; D-Los Angeles; Chapter 737) in 2012, creates a framework for the California Secure Choice Retirement Savings Investment Program. The program is a state-run retirement savings plan for private employees that includes automatic enrollment with an opt-out provision for an estimated 6.3 million California workers whose employers do not currently offer an eligible retirement savings program. Private employers with five or more employees will be required to automatically enroll their employees into and make payroll deductions for their Secure Choice retirement accounts, unless the employee opts out. Employers that do not offer a retirement plan or do not auto-enroll their employees into Secure Choice would be subject to a penalty; otherwise the program is intended to impose no risk or liability to the employer or to the state. It is intended that employers’ responsibility is simply as a pass-through; to deduct and submit contributions from employee wages. The program will be funded by an automatic 3% to 5% payroll deduction; specific default contribution will be determined by the Secure Choice Investment Board. There is no contribution made by the employer into the retirement account. According to the State Treasurer’s Office, late 2019 is likely to be the earliest that large employers that do not offer a retirement plan to their employees will be required to provide access to Secure Choice. The requirement will be phased in over a three-year period. Any information to the contrary is wrong. Please contact the Treasurer’s Office if you are told something different so they can correct the source by emailing securechoice@sto.ca.gov. CalChamber will continue to actively engage in rulemaking, closely monitor the activities of the Secure Choice Investment Board, and provide input as appropriate regarding program design and employer risk. The Internal Revenue Service (IRS) announced cost of living adjustments affecting 401(k) pension plans and other retirement-related items for tax year 2018 — including an increase in the amount employees can contribute to their 401(k) plans.
Some pension plan limitations, including those governing 401(k) plans, changed this year because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. Other limits remain unchanged because they did not meet the thresholds. Highlights for 2018 include:
The IRS also updated its cost of living adjustment (COLA) charts for retirement plan contribution limits. Employers may want to consider communicating these maximum contribution rates to employees. Retirement plan participants given access to professional advice are more likely to contribute the maximum amount than those without advice (45 percent to 36 percent), according to Natixis Global Asset Management’s 2016 Survey of Defined Contribution Plan Participants. CalChamber can read more about the Employee Retirement Income Security Act (ERISA) in the HR Library. Not a member? See how CalChamber can help you. The 2017 legislative year was a busy one for the California Chamber of Commerce and other employer advocates.
Nevertheless, CalChamber policy advocates, together with members, allied associations and local chambers of commerce, stopped many harmful proposals, won amendments to remove damaging provisions in other proposals, and helped pass bills to invest in the state’s future. In 2017, the CalChamber tracked 214 California bills, stopping 91 (including 25 job killers), securing amendments to 31 (16 of which were signed into law) and backing 16 bills that were signed into law. Job KillersStrong advocacy by the CalChamber, members, local chambers of commerce and allied employers prevented all but three job killer bills from passing the Legislature. On his last day to act on legislation, the Governor vetoed AB 1209 (Gonzalez Fletcher; D-San Diego), which would have imposed a new data collection mandate on California employers and exposed them to public criticism and costly litigation. CalChamber identified AB 1209 as a job killer because it would have: created a false impression of wage discrimination or unequal pay where none exists, therefore subjecting employers to unfair public criticism; exposed employers to significant litigation costs to defend against meritless claims; and imposed costs on the Secretary of State to collect and post the data. AB 1209 required employers with 500 or more employees in California to collect data on the difference in mean and median salaries paid to men and women in the same job title or classification and submit the information to the Secretary of State. The state then would have posted the company’s salary information—with the company name attached—on a publicly accessible website. The Governor stated in his veto message he is worried that the ambiguity in AB 1209 “could be exploited to encourage more litigation than pay equity.” Session HighlightsFollowing are highlights from the entire legislative session. For a list of all bills sent to the Governor this year, see the Final Status Report on Major Business Bills. Labor and Employment As usual, labor matters were among the hardest fought issues on the CalChamber agenda. The 2018 new laws will include: • Legislation mandating that small businesses with as few as 20 employees provide 12 weeks of parental baby bonding leave to employees (SB 63; Jackson; D-Santa Barbara). If an employee takes this leave, the new law prohibits an employer from refusing to maintain and pay for health care coverage. Employers can be sued for failing to provide the leave, failing to return the employee to the same or comparable position after the leave, failing to maintain benefits while the employee is out on leave or taking adverse employment action against an employee who uses the leave. More information on SB 63 appeared in the October 12 special Alert. • A new law banning employers from asking about, or considering, a job applicant’s prior salary history in determining whether to hire the applicant or how much to pay the applicant. An employer can also be penalized for not providing a pay scale for the position upon demand (AB 168; Eggman; D-Stockton). • Ban-the-box legislation prohibiting employers with five or more employees from asking about criminal history information on job applications and from inquiring about, or considering, conviction history information at any time before a conditional offer of employment has been made (AB 1008; McCarty; D-Sacramento). • The Immigrant Worker Protection Act that shields workers from immigration enforcement while on the job. The legislation prohibits employers from providing federal immigration enforcement agents access to a business without a warrant and requires employers to notify employees of Form I-9 inspections performed by federal immigration enforcement officials (AB 450; Chiu; D-San Francisco). Transportation and Infrastructure Legislation signed earlier this year with CalChamber support will provide long-term revenues to fix roads, freeways and bridges across California and put more dollars toward transit and safety (SB 1; Beall; D-San Jose). The fuel tax hikes will go into effect on November 1. Climate Change Also signed earlier this year was CalChamber-backed legislation to reduce costs of complying with the state’s climate change program. AB 398 (E. Garcia; D-Coachella)provides regulatory certainty for California businesses, helps maintain a healthy economy and provides the least costly path to achieving California’s climate goals by extending the cap-and-trade program to 2030 by providing market mechanisms rather than government command-and-control. A related constitutional amendment, ACA 1 (Mayes; R-Yucca Valley), will—if approved by voters—set up a legislative “check-up” of the cap-and-trade program in 2024, including a review of spending and the effectiveness of the program in reducing greenhouse gas emissions. Health Care A proposal to create a new single-payer health care system, SB 562 (Lara; D-Bell Gardens), stalled this year after facing opposition from the CalChamber and others who highlighted problems with a government-run, multibillion-dollar system financed by an unspecified and undeveloped “revenue plan.” The issue is likely to be revived in 2018. Housing Several CalChamber-supported bills were part of a package of legislation signed by the Governor to ease the housing crisis. The CalChamber-backed bills either hold local governments accountable for meeting the housing elements of their plans or aim to combat the “not in my backyard” (NIMBY) resistance that can stall needed housing projects. The bills are AB 678 (Bocanegra; D-Pacoima), SB 167 (Skinner; D-Berkeley) and AB 1515 (Daly; D-Anaheim). Last week in this space we summarized the findings of the Third Annual CalChamber Poll, which found California voters generally anxious about the future. Voters are very concerned about the cost of living – especially as it might affect the ability of their children to live in California. They cite the cost of housing, taxes and crime as concerns that are not being adequately addressed by the Legislature.
So how will voter attitudes translate to politics? This is speculative, of course, since the poll measured a point-in-time about a year ahead of the general election. But gauging voter priorities is important to understand how candidates can and should present their ambitions to voters in the coming year. The most striking finding is that a theoretical Republican gubernatorial candidate may be down, but not out. For example, a week after Donald Trump was elected in 2016, a Democratic candidate had a 12-point advantage over a Republican, 42% to 30%. This year, surveying the same likely 2018 general election voter, the Democrat led by only three points, 41% to 38%. Since President Trump’s approval ratings have not improved in the past year, the most likely explanation of this movement is dissatisfaction among California voters with the performance of elected Democrats. This is supported by a finding that majority of voters are concerned that the Legislature (82%) and Governor (63%) “are out of touch with the issues that are most important to people like me.” To be sure, you can’t beat somebody with nobody. Democratic candidates with long résumés are motivating their voters by hammering on President Trump, and Republican candidates are widely unknown. Nonetheless, voters want the next Governor to try to work with the President to solve California’s problems. An overwhelming (and bipartisan) majority of voters (71%) agree that “the state Legislature is spending too much time and attention resisting President Trump instead of trying to solve the real-life problems Californians face.” And by a 57% to 16% margin, voters would vote for a gubernatorial candidate “who does not support President Trump, but who would work with the President to get California’s fair share of federal funding.” In fact, even California voters value an anti-establishment bent. A majority (54%) of voters agree that, “regardless of your feelings toward Donald Trump, his opposition towards the traditional political establishment is necessary.” While Democrats and Republicans are split on the question, voters who do not affiliate with a party agree with this sentiment by a 58% – 37% margin. Looking at a hypothetical candidate for the Legislature, statewide voters tagged tougher anti-crime positions, fixing water infrastructure and changing teacher seniority rules as the most important issues. Voters were least impressed with candidates who supported the recent gas tax hike or who support changing the private health care system to create either a “Medicare for All” or single-payer system. Finally, voters still firmly support (73%) the all-party primary system, where the top two candidates in a primary election, regardless of party, advance to the general election. Regardless of political affiliation, Democrat (82%), Republican (59%) and no affiliation (73%) voters supported the current election system. The CalChamber poll was conducted online by Penn Schoen Berland (PSB) from October 4 to October 6, 2017 among n=1,000 definite California voters. The margin of error is +/- 3.1% at the 95% confidence level. The California Chamber of Commerce has released a report of California legislators’ floor votes for the first year of the 2017-18 legislative session, focusing on priority bills to the state’s business community. View the 2017 Vote Record This is the 43rd vote record the CalChamber has compiled in response to numerous requests by member firms and local chambers of commerce that would like a gauge by which to measure the performance of their legislators. To help readers assess legislators’ vote records, the charts group bills into nine areas: contracting out, environmental regulation, health care costs, housing and land use, industrial safety and health, labor and employment, legal reform and protection, privacy and telecommunications, and workers’ compensation. Partial Picture No vote record can tell the entire story of a legislator’s attitude and actions on issues of importance to business. To fully evaluate your legislative representative, consult the legislative journals and examine your legislator’s votes in committee and on floor issues. You can view these via links at www.calchambervotes.com. Many anti-business bills were rejected by legislators in policy or fiscal committees, thus stopping proposals before they reached the floor for a vote. The vote record does not capture these votes. Most bills in this report cover major business issues that are of concern to both small and large companies. The CalChamber recognizes that there are many bills supported or opposed by business that are not included in this vote record and analysis. Factors Considered The CalChamber considers the following factors in selecting vote record bills:
Priority Bills Contracting Out
Best Business Votes
A “Best Business Votes” section lists legislators according to the percentage of times they voted with the CalChamber position on the bills selected for the vote record. Votes when a legislator was absent are not included in calculating percentages. For more details on how the vote record is compiled and descriptions of the bills included, Click here. Senate 80% or more with CalChamber Anderson, Joel (R) 16-0 Bates, Patricia (R) 16-0 Berryhill, Tom (R) 16-0 Fuller, Jean (R) 16-0 Gaines, Ted (R) 16-0 Morrell, Mike (R) 16-0 Nguyen, Janet (R) 16-0 Nielsen, Jim (R) 16-0 Stone, Jeff (R) 16-0 Vidak, Andy (R) 16-0 Moorlach, John (R) 15-0 Cannella, Anthony (R) 15-1 Wilk, Scott (R) 15-1 40%-59% with CalChamber Glazer, Steve (D) 9-7 Roth, Richard (D) 8-7 Less than 40% with CalChamber Dodd, Bill (D) 4-12 Newman, Josh (D) 3-12 Hueso, Ben (D) 3-13 Pan, Richard (D) 3-13 Portantino, Anthony (D) 3-13 Allen, Ben (D) 2-14 Hernandez, Ed (D) 2-14 Hertzberg, Bob (D) 2-14 Bradford, Steven (D) 1-14 Galgiani, Cathleen (D) 1-14 Atkins, Toni (D) 1-15 de León, Kevin (D) 1-15 Hill, Jerry (D) 1-15 Lara, Ricardo (D) 1-15 McGuire, Mike (D) 1-15 Skinner, Nancy (D) 1-15 Wiener, Scott (D) 1-15 Mendoza, Tony (D) 0-15 Mitchell, Holly (D) 0-15 Stern, Henry (D) 0-15 Beall, Jim (D) 0-16 Jackson, Hannah-Beth (D) 0-16 Leyva, Connie (D) 0-16 Monning, Bill (D) 0-16 Wieckowski, Bob (D) 0-16 Assembly 80% or more with CalChamber Allen, Travis (R) 15-0 Bigelow, Frank (R) 15-0 Brough, Bill (R) 15-0 Chen, Phillip (R) 15-0 Flora, Heath (R) 15-0 Harper, Matthew (R) 15-0 Kiley, Kevin (R) 15-0 Mayes, Chad (R) 15-0 Obernolte, Jay (R) 15-0 Patterson, Jim (R) 15-0 Voepel, Randy (R) 15-0 Gallagher, James (R) 14-0 Acosta, Dante (R) 14-1 Fong, Vince (R) 14-1 Mathis, Devon (R) 14-1 Melendez, Melissa (R) 13-0 Chávez, Rocky (R) 13-2 Lackey, Tom (R) 13-2 Steinorth, Marc (R) 13-2 Waldron, Marie (R) 13-2 Cunningham, Jordan (R) 12-2 Dahle, Brian (R) 12-2 Grayson, Tim (D) 12-3 Choi, Steven (R) 10-1 60%-79% with CalChamber Gray, Adam (D) 11-4 Frazier, Jim (D) 10-5 Maienschein, Brian (R) 10-5 40%-59% with CalChamber Baker, Catharine (R) 8-7 Cooper, Jim (D) 8-7 Salas, Rudy (D) 8-7 Daly, Tom (D) 7-8 Less than 40% with CalChamber Arambula, Joaquin (D) 5-10 Irwin, Jacqui (D) 5-10 O’Donnell, Patrick (D) 5-10 Rubio, Blanca (D) 5-10 Cervantes, Sabrina (D) 4-11 Cooley, Ken (D) 4-11 Ridley-Thomas, Sebastian (D) 3-11 Aguiar-Curry, Cecilia (D) 3-12 Caballero, Anna (D) 3-12 Dababneh, Matt (D) 3-12 Gipson, Mike (D) 3-12 Levine, Marc (D) 3-12 Quirk-Silva, Sharon (D) 3-12 Bocanegra, Raul (D) 2-13 Burke, Autumn (D) 2-13 Medina, Jose (D) 2-13 Muratsuchi, Al (D) 2-13 Quirk, Bill (D) 2-13 Rodriguez, Freddie (D) 2-13 Eggman, Susan Talamantes (D) 1-11 Chu, Kansen (D) 1-13 Gloria, Todd (D) 1-14 Gonzalez Fletcher, Lorena (D) 1-14 Jones-Sawyer, Reginald (D) 1-14 Low, Evan (D) 1-14 McCarty, Kevin (D) 1-14 Nazarian, Adrin (D) 1-14 Santiago, Miguel (D) 1-14 Weber, Shirley (D) 1-14 Chau, Ed (D) 0-13 Garcia, Eduardo (D) 0-13 Berman, Marc (D) 0-14 Bloom, Richard (D) 0-14 Bonta, Rob (D) 0-14 Calderon, Ian (D) 0-14 Friedman, Laura (D) 0-14 Holden, Chris (D) 0-14 Limón, Monique (D) 0-14 Mullin, Kevin (D) 0-14 Rendon, Anthony (D) 0-14 Reyes, Eloise (D) 0-14 Wood, Jim (D) 0-14 Chiu, David (D) 0-15 Garcia, Cristina (D) 0-15 Kalra, Ash (D) 0-15 Stone, Mark (D) 0-15 Thurmond, Tony (D) 0-15 Ting, Phil (D) 0-15 Gomez, Jimmy (D)* 0-5 *Jimmy Gomez elected to U.S. House of Representatives; took office July 11, 2017. Californians are anxious.
The economy is growing, the state budget is balanced and the rains have resumed. Yet California voters are apprehensive about the future. They worry that state leaders are not addressing the issues that truly concern them, according to the third annual CalChamber Poll. For the first time in three years of polling, slightly more voters say that California is headed down the wrong track (52%) than in the right direction (48%). Their assessment for the nation is even worse: twice as many voters have a negative outlook on the country’s direction than have a positive impression. Parents are uneasy about their kids’ futures. Of the 28% of voters with children living at home, 61% agree that their children will have a better future if they leave California. Reasons include the high cost of living here, high taxes and worry about landing a good job. This is the Cal Exit to worry about. On jobs, where you live determines your perception of reality. San Francisco Bay Area voters see a strong job creation climate in their region, with nearly a quarter of voters seeing “a lot of new jobs” in the area, and nearly eight in ten seeing “a lot” or “some” new jobs. Elsewhere, the perception is dimmer. Coastal southern Californians see a moderate number of new jobs in their regions, while voters in the Inland Empire and Central Valley are more pessimistic, with only 5% seeing “a lot” of new jobs and less than two in five even seeing “some” new jobs. When asked about the quality of these new jobs, among voters who respond that “a lot” or “some” new jobs are being created, a majority statewide believe that most of these new jobs “tend to be dead ends that don’t lead to the middle class,” while a minority say the new jobs are “the type that lead to higher pay and middle class living.” Regional differences also are stark here. Most SF Bay Area voters believe the new jobs will lead to higher pay and the middle class, while – by a two-to-one margin – Inland Empire and Central Valley voters believe most new jobs will be dead end jobs. Crime is also increasingly on the minds of the public. Voters overwhelmingly agree that elected officials in Sacramento are not spending enough time on reducing crime (86%) or expanding police powers to limit panhandling, homelessness and public drug use in city parks (66%). They would be more likely to support legislative candidates who take a tough-on-crime approach, such as expanding the list of violent crimes for which early release is not an option, such as felony domestic violence and child sex trafficking (92%), reinstating DNA collection for certain misdemeanors to help law enforcement solve cases (77%), and revise upward the threshold for serial theft to be a felony (76% support). While most voters have heard a great deal about making California a “sanctuary state,” by a nearly two-to-one margin they believe elected officials are spending too much time on the issue. Democratic gubernatorial candidates may face calls to support a “single-payer” health care system, but voters are simply not impressed. Voters strongly support subsidies for people who cannot afford their own health care (75%) and for those who have pre-existing health conditions (81%), but are not ready to embrace government-run health care. Voters overwhelmingly prefer to keep their current health insurance (71%) over switching to a single-payer approach (29%). Voters feel disconnected from their elected leaders, agreeing that the Legislature (82%) and Governor (63%) are “out of touch with the issues that are important to people like me.” Issues that voters care about but believe the Legislature is not spending enough time on include crime, job creation, keeping energy prices low and building more highways. Speaking of transportation, considering alternatives to the gasoline tax, voters prefer a mileage-based user fee (29%) to other choices, such as a tax on carbon emissions (20%), issuing state bonds (19%), raising the state sales tax (9%) or reducing spending on schools, colleges and health care (9%). Voters were very supportive (61%) of paying for road repairs by replacing the gasoline tax with a mileage fee, in the context of increasing automobile fuel efficiency and the increasing number of vehicles that don’t use gasoline at all. Voters are far less supportive of other fees and taxes on driving. Only 37 percent support extension of the cap-and-trade program if it caused a fifty-cent-a-gallon hike in the price of gasoline. A $1.50 price increase drives support down to just 30% of voters. The news is even worse for advocates of mileage fees to reduce driving. By a three-to-one margin, voters oppose legislative limits on driving, such as new fees, purposely designing roads to be more congested, or not expanding highway capacity at all. Voters do not support (40%) banning gasoline-powered cars by 2030, although younger voters (67%) and voters in the San Francisco Bay Area (50%) seem intrigued by the idea. On the quintessential California tax issue, voters still vigorously embrace the Proposition 13 property tax reforms. Across the board, California voters (81%) have a very or somewhat favorable view of Proposition 13. This view is consistent, whether voters own their homes (85%) or rent (72%), and whether they are Democrat (75%), Republican (90%) or no party (83%). The CalChamber poll demonstrates that voter anxiety and disconnection is as present in California as elsewhere in the country, notwithstanding the steadfast dominance of Democrats in political leadership. The CalChamber poll was conducted online by Penn Schoen Berland (PSB) from October 4 to October 6, 2017 among n=1,000 definite California voters. The margin of error is +/- 3.1% at the 95% confidence level. California has received $500,000 from the U.S. Small Business Administration to increase export activities among small businesses. The funding, part of the State Trade Export Promotion program, will boost trade in foreign markets, – including China, Europe, Southeast Asia, and Mexico, – and encourage exports of information technologies, food and agricultural products, consumer goods and medical equipment. California is the one of the largest exporting states in the nation. The state exports more than $163 billion in products, about 11% of all U.S. exports. This international trade supports more than 706,000 California jobs. Top markets for California’s exports include Mexico, Canada and China. “On average, more than 25 percent of California’s agricultural production is exported,” said California Department of Food and Agriculture (CDFA) Secretary Karen Ross. “This federal funding is a victory for farmers and ranchers, food manufacturers, and the rural communities where they operate.” California’s State Trade Export Promotion (STEP) program is a partnership between the Governor’s Office of Business and Economic Development (GO-Biz), CDFA, the California Community Colleges Chancellor’s Office and the Centers for International Trade Development. The program brings together state, federal, private and nonprofit trade promotion organizations to promote export activities among targeted industries. California STEP is funded in part by a U.S. Small Business Administration grant. In light of various emergencies and disasters throughout the state, the California Chamber of Commerce is educating employers about a few things they should know about paying employees, leaves of absences and planning ahead in emergencies.
Paying Employees Even in an emergency, employers must be mindful of obligations under state employment laws and consider pay issues for exempt and nonexempt employees related to office closures. Employers must pay exempt employees a full weekly salary for any week in which any work is performed. If the business is closed for the whole week, however, employers don’t need to pay exempt employees. In emergencies, special pay rules apply for nonexempt employees. If your business shuts down for any of the following reasons, you must only pay nonexempt employees for the hours they worked prior to being sent home:
However, if you shut down your business at your discretion (and not for one of the above reasons), reporting time pay may be owed. When a nonexempt employee shows up for work as scheduled and is not put to work or is given less than half of his/her scheduled hours, the employee would be eligible for reporting time pay: pay for one half of the scheduled shift, no less than two hours and no more than four hours. Of course, employers are always free to pay employees or let them use vacation or other personal time. Many employers may choose to provide some paid time during emergency situations. Just remember to be consistent! Leaves of Absence for Emergency Personnel Some of your employees may serve as volunteers for local fire departments or other emergency response entities. All employers must provide leaves of absence for employees who are required to perform emergency duty. Employers are not required to compensate the employee during this time off. Leave for Health Issues Employees may be entitled to time off to deal with health issues that occur as a result of the disaster. For instance, employees may use their California mandatory paid sick leave for the care or treatment of a health condition for themselves or a family member, as defined by the law. They also may be eligible for time off for family or medical leave for themselves or to care for family members with any serious health conditions under the federal Family Medical Leave Act (FMLA) or the California Family Rights Act (CFRA). The FMLA and the CFRA cover employers with 50 or more employees and provide a maximum of 12 weeks of unpaid leave in a 12-month period. Employers may have obligations to reasonably accommodate an employee under the federal Americans with Disabilities Act (ADA) and the state Fair Employment and Housing Act (FEHA). Should an employee suffer a physical or mental injury because of a natural disaster, they may be entitled to protections under these laws. School or Childcare Leave Employers with 25 or more employees working at the same location may need to provide unpaid time off to employees whose children’s school or child care is closed due to a natural disaster, such as a fire, earthquake or flood. For emergency situations, the time must not exceed 40 hours per year. Protecting Workers Employers must remember their obligations to provide a safe workplace. Cal/OSHA is advising employers to take special precautions to protect workers from hazards from wildfire smoke. Cal/OSHA has posted materials that provide guidance for employers and workers on working safely in conditions with heavy smoke caused by the wildfires. Planning Ahead The single, most important thing employers can do is create an Emergency Action Plan (EAP) and communicate that plan to employees. Employers should inform employees that the plan exists and what steps the plan outlines. As an employer, you have an obligation to create and maintain a safe workplace for your employees. All California employers are required to have an EAP designating the actions that must be taken to protect employees from fire and other emergencies. California employers must also have a Fire Prevention Plan (FPP) that details the fire hazards your employees may face and how to handle a fire should the situation arise. When employees are initially assigned to a job or transferred to a new position, the employer should review parts of the EAP and FPP employees must know so they can protect themselves in the event of an emergency. Employers should retrain employees if they change the EAP or FPP and should periodically conduct emergency training and drills. When considering emergency situations, employers should plan how they will handle and communicate office closings and determine who will make the final decision on whether to close. Determine also if alternative workplaces are available, whether certain employees can work from home or whether to shut down all work during the emergency. CalChamber members can find more information on Emergency Action Plans and Fire Prevention Plans during emergencies on HRCalifornia. Cal/OSHA offers resources as well. Not a member? See how CalChamber can help you. Governor Edmund G. Brown Jr. signed legislation on October 12 mandating that small businesses provide a new protected leave of absence.
SB 63 (Jackson; D-Santa Barbara) was identified by the California Chamber of Commerce as a job killer. Also signed today was AB 168 (Eggman; D-Stockton), which bans employers from inquiring about a job applicant’s salary history. Both bills take effect on January 1, 2018. SB 63 will require employers to provide 12 weeks of baby bonding leave to employees in addition to the myriad of other leaves of absence programs California already imposes. This bill affects small employers with as few as 20 employees and applies to those employees who:
Combined with other protected leaves, the bill could result in small employers having to provide up to seven months of protected leave for the same employee. This bill will have the greatest impact on employers with 20 to 49 employees who are not already required to provide family leave under the federal Family and Medical Leave Act or the state California Family Rights Act. The bill also prohibits an employer from refusing to maintain and pay for coverage under a group health plan for an employee who takes this leave. In addition, the bill carries the threat of litigation for employers. SB 63 labels an employer’s failure to provide a requested leave as an “unlawful employment practice.” The employer is subject to a lawsuit should the employee allege that his or her employer: • Did not provide the 12 weeks of protected leave; • Failed to return the employee to the same or comparable position; • Failed to maintain benefits while the employee was out on leave; or • Took any adverse employment action against the employee for taking the leave. In addition, SB 63 will require the Department of Fair Employment and Housing, upon receiving funding from the Legislature, to create a parental leave mediation pilot program. Under the pilot program, within 60 days of receipt of a right-to-sue notice, an employer may request all parties to participate in the department’s Mediation Division Program. If the employer makes such a request, the bill would prohibit an employee from pursuing any civil action under these provisions until the mediation is complete, which would include an employee’s election not to participate in mediation. The bill would provide that the employee’s statute of limitations would be tolled during the course of the mediation, as specified. The pilot program will end on January 1, 2020. Under AB 168 employers are banned from asking about a job applicant’s salary history and from relying on salary history information as a factor in determining what salary to offer an applicant. An employer could be penalized for failing to provide a pay scale for the position upon demand. Any violation of the provisions in AB 168 carries a huge threat of costly litigation under the Labor Code Private Attorneys General Act (PAGA). CalChamber will provide information, including a November webinar, to members about how to ensure compliance with these new laws and develop appropriate policies for their businesses. Wage and hour changes are on the horizon once again. In 2016, Governor Edmund G. Brown Jr. signed SB 3, making California the first state in the nation that committed to raising the minimum wage to $15 per hour statewide. Under the bill, California’s minimum wage increases annually so it hits $15 per hour for all businesses by 2023. Large businesses with 26 or more employees began complying on January 1, 2017, and will reach $15 per hour in 2022. The increase in 2018 for large businesses is 50 cents — from the current rate of $10.50 per hour to the new rate of $11 per hour. Small businesses with 25 or fewer employees had a one-year delay; they will see their first increase on January 1, 2018, and will have until 2023 to reach the $15 per hour rate. The increase in 2018 for small businesses is from the current rate of $10 per hour to the new rate of $10.50 per hour. In the midst of all the statewide changes, various localities throughout California continue to pass their own ordinances that will affect how employees are paid. Employers should start preparing for these changes by examining all pay practices that may be affected. Minimum Wage The staggered minimum wage increases over the next several years are as follows: California employers must pay employees no less than the state minimum wage per hour for all hours worked.
When laws differ, employers must comply with the more restrictive requirement — in other words, the requirement that gives the biggest benefit to the employee. Since California’s state minimum wage is higher than the federal minimum wage of $7.25 per hour, most employers will be required to pay that rate. As mentioned above and discussed further below, local ordinances may also come into play. The obligation to pay the state minimum wage can’t be waived by any agreement, including a collective bargaining agreement. Remember that a top priority for state enforcement agencies is to stop employers from engaging in so-called “wage theft,” which includes not paying the minimum wage for all hours worked. The minimum wage increase affects not only your nonexempt minimum wage workers, but also has other ramifications, such as exempt/nonexempt classification and posters and notice requirements, discussed below. Preparation, as always, is key. Overtime Rate The minimum wage rate change also affects overtime pay. Effective January 1, 2018, the overtime rate for minimum wage employees increases but varies depending on whether you’re a large or small business:
Classifying Employees Exempt/nonexempt classification is always a tricky issue, as employers must ensure that employees meet the salary basis test for the particular exemption claimed. For an employee to meet a “white collar” exemption from overtime (the commonly used administrative, executive or professional exemptions), California law states that the employee must earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment, in addition to meeting all other legal requirements for the exemption. Effective January 1, 2018:
Future increases will also affect the salary threshold. Also, certain commissioned inside sales employees can be eligible for an overtime exemption under Wage Order 4 and Wage Order 7. Generally, the exemption applies if the employee earns more than 1.5 times the minimum wage and more than half of the employee’s compensation represents commission earnings. Employers will need to make sure that commissioned inside sales employees continue to meet this test after the January 1 minimum wage increase. Outside salespeople do not need to meet the minimum salary requirements. Misclassification is costly. Employers who are unsure whether their employees ought to be exempt or nonexempt should always check with their legal counsel. Posters and Notice Requirements The minimum wage rate change affects notice requirements for the minimum wage posting, itemized wage statements and wage notices. First, all California employers must post the state’s official Minimum Wage Order (MW-2017) in a conspicuous location frequented by employees. The official notice includes the increase for both 2017 and 2018. Second, California employers must provide each employee with an itemized statement, in writing, at the time wages are paid (Labor Code Section 226). Among other mandatory information, the itemized wage statement must include all applicable hourly rates in effect during the pay period and the corresponding number of hours the employee worked at each hourly rate. Itemized wage statements will need to reflect any increased wages. Finally, employers in California must provide nonexempt employees with a wage notice pursuant to Labor Code Section 2810.5. The written notice must be provided at the time of hire and again within seven calendar days after any information in the notice is changed. Among other things, employers are required to notify nonexempt employees, in writing, when there is any change to:
NOTE: If an employee’s rate of pay will increase on January 1, 2018, due to the state minimum wage increase, the employee must receive notice from his/her employer by January 7, 2018. However, if the employer has reflected the change on a timely itemized wage statement and the statement meets all legal requirements, the separate wage notice is not required. Meals and Lodging Most of California’s Wage Orders allow employers to credit meals and lodging furnished by the employer toward the employer’s minimum wage obligation (Section 10 of the Wage Orders). The 2018 credit amounts for meals and lodging are listed on the official MW-2017. Piece-Rate Employees The minimum wage increase also affects piece-rate employees. Piece-rate workers must receive at least the minimum wage for each hour worked. A law that took effect in 2016 requires payment of rest and recovery periods or other non-productive time at specified hourly rates. Employers with piece-rate compensation systems need to ensure they are complying with the new minimum wage standard. Draws Against Commissions A commissioned employee may receive a sum of money that is intended as an advance, draw or guarantee against the employee’s expected commission earnings. In California, employers must pay these sums at least twice per month. If an employee receives a draw against commissions to be earned at a future date, the “draw” must be equal to at least the minimum wage and overtime due to the employee for each pay period (unless the employee is exempt). Employers with commissioned employees should make certain that any draw against future commissions uses the new minimum wage rate as a basis. Tools or Equipment When an employer requires that employees use certain tools or equipment, or when the tools or equipment are necessary for an employee to perform the job, the employer must provide and maintain the tools or equipment. There is an exception, however, for employees whose wages are at least two times the minimum wage; they can be required to provide and maintain their own hand tools and equipment customarily required by the trade or craft in which they work. If you require employees to provide and maintain their own hand tools and equipment, make sure that the employees earn at least two times the minimum wage rate in effect. Subminimum Wage There is no distinction between adults and minors when paying the minimum wage. A limited exception exists for “learners,” but that exception does not depend on a person’s age. “Learners” are employees who have no previous similar or related experience in the occupation. California’s Wage Orders permit you to pay learners 85 percent of the minimum wage, rounded to the nearest nickel. State law allows the subminimum wage to be paid for only the first 160 hours of work, after which the employee must be paid at least minimum wage. The subminimum wage rate will increase to $9.35 per hour effective January 1, 2018, for employers with 26 or more employees. It will increase to $8.93 per hour for employers with 25 or fewer employees. Federal and state laws provide different definitions of learners. California employers must be careful to comply with both federal and state subminimum wage requirements and give employees the benefit of whichever law is more favorable to the employees. If you use the “learner” rate, ensure that you follow the strict guidelines for when you can pay the lower rate and use the appropriate rate calculation beginning January 1. Keep accurate records of time worked and do not pay the subminimum wage after the employee reaches 160 hours of work. Local Minimum Wage Ordinances Keep in mind that some cities and counties in California adopted their own local minimum wage rates that may exceed the state rate. This is part of a growing trend in which several cities are enacting local ordinances. If you’re covered by a local ordinance with a higher minimum wage rate, you will have to pay that rate to employees. In addition, if you are covered by a local minimum wage ordinance, you must make sure to post the current local ordinance poster. Best Practices for California Employers
A 2014 California Chamber of Commerce job creator bill is being credited with encouraging some film and television productions to remain in or return to the state in a recent report from the California Film Commission.
The film commission report, released September 25, says the expanded Film and Television Tax Credit Program 2.0 led to a sustained 12% increase in hours worked in state, the relocation of a growing number of established TV series to California from out of state, and more filming outside the greater Los Angeles zone. Program 2.0 resulted from the 2014 job creator AB 1839 (Gatto; D-Glendale; Chapter 413). California GainsIn the two years of the expanded program, according to the film commission report, California has gained 38 feature film projects and 50 TV projects—eight pilots, two movies of the week, 27 TV series, one mini-series and 12 TV series relocating to California. Tax credit projects are projected to spend $28 million across 10 counties outside of Los Angeles County, the report says. All the projects are generating an estimated $3.7 billion in direct spending to the state, including $1.4 billion in below-the-line wages (for production workers and the like). The 12 TV series relocating to California after previously receiving tax credits in other states are on track to spend more than $891 million in California, according to the film commission report. Increased Incentives Taking effect in January 2015, the five-year Program 2.0 more than tripled the size of California film and TV production incentives—from $100 million a year to $330 million a year through the 2019–2020 fiscal year. Program 2.0 allows productions previously excluded from seeking the credits to become eligible for the funding. The newly eligible projects included big-budget feature films costing $75 million or more, TV pilots and one-hour series for any distribution outlet. While eligibility is expanded, the program caps the maximum credit any one project can receive. The report notes that each big-budget feature film employs thousands of workers and typically uses more than a thousand support businesses. Moreover, a big-budget film also may require the use of several large sound stages to build elaborate sets. To encourage filming throughout the state, the program offers an additional 5% tax credit to productions that shoot outside the 30-mile zone around Los Angeles or have qualified expenditures for music scoring or track recording. Local Economic Gains The report notes that when productions film on location outside the Los Angeles area, they typically spend $50,000–$100,000 per day in the local region. The spending benefits many small businesses, including grocers, hardware stores, gas stations, hotels and other retail businesses, as well as local hires for services such as catering and construction work. Local governments gain from payments made to local police and fire departments, plus revenue from local permit fees. Previous Job Creator Bills Earlier legislation helping contribute to the return of film and television productions to California includes two 2012 CalChamber job creator bills. Both AB 2026 (Fuentes; D-Los Angeles; Chapter 841) and SB 1197 (R. Calderon; D-Montebello; Chapter 840) helped protect jobs in the film industry by extending the film tax credit for two years, until July 1, 2017. More Information For more information, see the Progress Report on film and television tax credit programs on the California Film Commission website, www.film.ca.gov. Several bills supported by the California Chamber of Commerce to encourage local governments to approve new housing projects passed the Legislature on the last day of the session and are on their way to the Governor. The bills either hold local governments accountable for meeting the housing elements of their plans or aim to combat the “not in my backyard” (NIMBY) resistance that can stall needed housing projects. Now awaiting action by the Governor are: AB 678 (Bocanegra; D-Pacoima): Promotes Local Agencies’ Compliance with the Housing Accountability Act. The bill seeks to ensure that local agencies comply with the provisions of the Act by requiring a local agency to make relevant findings if it denies a project, clarifying provisions of the Act, and imposing penalties on agencies that violate the Act. AB 1515 (Daly; D-Anaheim): Stimulates Additional Housing Production. AB 1515 encourages housing project approvals by specifying that a housing development is deemed consistent with local plans and ordinances if there is substantial evidence such that a reasonable person could conclude that the project is consistent. SB 167 (Skinner; D-Berkeley): Accountability of Local Agencies for Housing Development Project Decisions. The bill promotes accountability for decisions and approval of projects by imposing additional requirements on local agencies when disapproving or conditionally approving a project, and imposing penalties for violation of the Act. Action NeededThe CalChamber is encouraging members to contact the Governor and ask him to sign AB 678, AB 1515 and SB 167. As the 2017 legislative session came to a close early Saturday morning, 24 of 27 identified job killer bills had been effectively stopped through efforts of the California Chamber of Commerce, local chambers and the business community.
Many job killer bills were the focus of rigorous debate and controversy; in fact, two new job killers were identified last week as a result of amendments added when the bills were being considered on the house floors. Below is a recap on the highest profile job killer bills that were still active in the last two weeks of the session. To Governor; Action NeededThree job killers are on the governor’s desk. The CalChamber is urging its members to contact Governor Brown and ask him to veto AB 1209, SB 33, SB 63. Below is a summary of each bill: • AB 1209 (Gonzalez Fletcher; D-San Diego) Public Shaming of Employers — Imposes new data collection mandate on California employers to collect and report data to the Secretary of State regarding the mean and median salaries of men and women in the same job title and job description, determine which employees perform “substantially similar” work, and then have that report posted on a publicly accessible website, where such employers will receive undue scrutiny and criticism for wage disparity that is not unlawful and justified by a bona fide factor. • SB 33 (Dodd; D-Napa) Discrimination Against Arbitration Agreements — Unfairly discriminates against arbitration agreements contained in consumer contracts for goods or services with a financial institution, as broadly defined, which is likely preempted by the Federal Arbitration Act and will lead to confusion and unnecessary litigation. • SB 63 (Jackson; D-Santa Barbara) Imposes New Maternity and Paternity Leave Mandate — Unduly burdens and increases costs of small employers with as few as 20 employees by requiring 12 weeks of protected employee leave for child bonding and exposes them to the threat of costly litigation. Job Killers Stopped AB 127 (Committee on Budget) was identified as a job killer on September 13 when language was added to a budget bill that threatened energy reliability by mandating the closure of the Aliso Canyon natural gas storage facility. CalChamber had identified AB 127 as a job killer because it would have eliminated jobs and placed regional energy reliability at risk. The bill was never taken up for a vote on the Senate Floor. SB 49 (de León; D-Los Angeles), which would have created uncertainty and increased potential litigation regarding environmental standards, was held in the Senate Rules Committee. The bill would have given broad and sweeping discretion to state agencies to adopt rules and regulations more stringent than the federal rules. SB 49 would have increased the potential for costly litigation by creating private rights of action under California law, which may be triggered when a state agency takes the foregoing discretionary action. Finally, a job killer bill that would have increased permitting fees and delayed permitting, SB 774 (Leyva; D-Chino), was held on the Assembly Floor inactive file, just days after being amended with onerous provisions. It would established the California Toxic Substances Board within the Department of Toxic Substances Control (DTSC), requiring DTSC to adopt a new fee schedule by January 1, 2019 “at a rate sufficient to reimburse the department’s costs to implement” its statutory requirements. SB 774 was tagged as a job killer because it bypassed public participation and input and would have allowed DTSC to adopt future fee schedules as “emergency” regulations when such regulations would have had significant impacts on permittees’ ability to continue to provide vital services to California communities. Cumulative Job Killer Vetoes 2017: 27 job killers identified, 3 sent to Governor Brown; 2016: 24 job killers identified, 5 sent to Governor Brown, 4 signed, and 1 vetoed; 2015: 19 job killer bills identified, 3 sent to Governor Brown, 1 signed, and 2 vetoed; 2014: 27 job killer bills identified, 2 sent to Governor, signs 2; 2013: 38 job killer bills identified, 1 sent to Governor, signs 1; 2012: 32 job killer bills identified, 6 sent to Governor, 2 vetoed; 2011: 30 job killer bills identified, 5 sent to Governor, 4 vetoed; 2010: 43 job killer bills identified, 12 sent to Governor, 10 vetoed; 2009: 33 job killer bills identified, 6 sent to Governor, 6 vetoed; 2008: 39 job killer bills identified, 10 sent to Governor, 9 vetoed; 2007: 30 job killer bills identified, 12 sent to Governor, 12 vetoed; 2006: 40 job killer bills identified, 11 sent to Governor, 9 vetoed; 2005: 45 job killer bills identified, 8 sent to Governor, 7 vetoed; 2004: 23 job killer bills identified, 10 sent to Governor, 10 vetoed; 2003: 53 job killer bills identified, 13 sent to Governor, 2 vetoed; 2002: 35 job killer bills identified, 17 sent to Governor, 5 vetoed; 2001: 12 job killer bills identified, 5 sent to Governor, 2 vetoed; 2000: No job killers identified. Of 4 bad bills identified at end of session, Governor Davis signs 2 and vetoes 2; 1999: 30 job killer bills identified, 9 sent to Governor, 3 vetoed; 1998: 64 job killer bills identified, 11 sent to Governor, 11 vetoed.; 1997: 57 job killer bills identified, 9 sent to Governor, 9 vetoed. Administration Announces Intention to Rescind DACA Program California Chamber of Commerce President and CEO Allan Zaremberg issued a statement September 5, renewing the call for comprehensive immigration reform in light of the announcement that the federal government will rescind the Deferred Action for Childhood Arrivals (DACA) program. The DACA program was created in June 2012 and allows certain undocumented immigrants who entered the county as minors to receive a renewable two-year period of deferred action from deportation and eligibility for a work permit. “CalChamber has been a steadfast proponent of comprehensive immigration reform because it is crucial to California’s economic future,” said Zaremberg. “The announcement by Attorney General Sessions highlights the need for comprehensive immigration reform once again and emphasizes the need for an immediate bipartisan solution to provide certain legal status for Dreamers. DACA has shown us that certainty in legal status fosters success in education, employment and job creation. It is a roadmap to achievement if we provide legal certainty for California’s more than 2.5 million undocumented residents.” California has more at risk than other states. There are nearly 800,000 workers and students enrolled in DACA in the United States. About 200,000 of those individuals are Californians. The end result of uprooting 200,000 Californians, 95% of whom are gainfully employed or enrolled in college, would create change for which the state is unprepared. “Congress must act swiftly to address this issue so we aren’t left with a problem of losing productive tax-paying jobs,” Zaremberg said. Zaremberg continued, “An important aspect of California’s economy is our booming technology industry, which relies on highly skilled talent to innovate, design, manufacture, create jobs and enable success in the global marketplace. As things stand today, California cannot find enough ‘home grown’ engineers and scientists. We need to reform our inadequate H-1B visa program. Without reform, our jobs leave for offshore locations which would not be a good outcome for the state.” Many sectors of California’s economy will benefit from immigration reform. “In addition to the technology sector, the agricultural industry would benefit from the certainty created through comprehensive immigration reform,” Zaremberg said. “We need a bipartisan solution that will provide a permanent legislative solution for Dreamers,” Zaremberg concluded. “We need to preserve California’s workforce and our ability to compete in the global economy. Comprehensive immigration reform will bring certainty to employers, employees and families.” A careful and historic compromise forged by the Legislature and the California Chamber of Commerce is under attack by legislation seeking to expand workplace litigation. AB 1209 by Assemblymember Lorena Gonzalez Fletcher (D-San Diego) is being considered this week by the Senate Appropriations Committee. CalChamber has tagged AB 1209 a job killer. CalChamber and numerous employer organizations oppose AB 1209 because it will expose employers to significant litigation costs and create a false impression of wage discrimination or unequal pay where none exists. The bill also threatens employee privacy by inappropriately forcing the disclosure of their wages. “This takes direct aim at the 2015 compromise,” said Jennifer Barrera, CalChamber senior policy advocate. “AB 1209 thumbs the scale for plaintiffs’ litigators to ease their ability to make a pay equity case.” The current law makes plain that the standard for equal wages is “substantially similar work,” not merely the job title or description. It also carefully allocates the litigation burdens between the employee and employer. The new measure disregards this careful balance, and instead requires employers to collect statistical data on salaries of all well-paid white collar employees in selected private and nonprofit corporations. By using the smokescreen of transparency, the measure would unravel a carefully structured compromise that advanced both employee and employer interests. A California Chamber of Commerce-opposed bill that imposes a cost to contractors with county contracts and subjects contractor and subcontractor employees’ private information to Public Records Act requests has been held in a Senate fiscal committee pending review of the bill’s financial impact on the state budget. The CalChamber-led coalition is opposed to AB 1250 (Jones-Sawyer; D-South Los Angeles) because the bill seeks to severely limit options for county agencies to determine the most appropriate solution to providing efficient and effective public service by establishing significant and costly obstacles for agencies and for vendors contracting for personal services. Must Justify Contracts AB 1250 imposes not only onerous requirements on counties in order to justify the need for contracting out personal services, but also imposes costs on contractors. The bill requires the agency to conduct an audit of the contract to determine if anticipated cost savings of the contract have been realized. The contractors would be required to reimburse the agency for the cost of the analysis, and would be prohibited from factoring the cost of the audit into the contract costs, thereby imposing a fee on the contractor. If the onerous process for these agencies to follow when seeking to contract for personal services does not discourage the agency from attempting the process, the cost to the contractors will discourage many from engaging. AB 1250 requires the contractor, on a monthly basis, to furnish the names and hourly rates of all contractor and subcontractor employees, as well as any independent contractor’s names and compensation. This private information would be provided to anyone who makes a request, per the Public Records Act. The public release of private information could be damaging to the individuals whose contact information is exposed. It is unclear why providing this personal information benefits the public. Counties have a long history of addressing service delivery challenges with creativity, self-reliance and innovation in partnership with the private sector. Limited budgets create further challenges to local governments that can sometimes be addressed through using outside vendors to provide services. By establishing near-insurmountable barriers to contracting, AB 1250 seeks to eliminate even the consideration of contracting as a tool to meet the needs of these agencies. By limiting their choices, AB 1250 limits the options that counties rely upon to provide public services, and stay within their means. If in fact a county makes it to this point and determines that contracting out these services has merit, there may not be any contractors to bid on these contracts because of the costs associated with reimbursing the contracting agencies for the required audit. AB 1250 will in effect leave agencies with limited choice, or lacking the ability to maintain and provide needed services altogether. Department of Finance Opposed During the Senate Appropriations Committee hearing on August 21, the state Department of Finance (DOF) announced that it opposes the bill because AB 1250 “would create unknown, but likely significant General Fund costs to the state.” The DOF opposition rationale also aligns with the CalChamber-led coalition’s concerns about increased costs from AB 1250. Action Needed September 1 is the deadline for all bills to be sent to the Senate and Assembly floors. CalChamber urges members to contact their senator and member of the Senate Appropriations Committee and recommend they oppose AB 1250 and hold the bill in the appropriations committee. The California State Assembly and Senate return today from their month-long summer recess and will consider the remaining job killer bills over the next several weeks. The next significant deadline for the job killer bills is September 1, the date by which fiscal committees must send the bills along for consideration by the entire Senate or Assembly. In addition, nine tax-related job killer bills remain alive because they were not subject to the July 21 deadline for bills to pass policy committees and move to fiscal committees. Although they still are eligible for consideration, they are not set for hearings at this time. Job Killer Bills Three Senate job killer bills and one Assembly job killer bill remain active. The California Chamber of Commerce has identified 25 job killer bills to date. The following job killers are still moving: Arbitration Discrimination SB 33 (Dodd; D-Napa) Discrimination Against Arbitration Agreements — Unfairly discriminates against arbitration agreements contained in consumer contracts for goods or services with a financial institution, as broadly defined, which is likely preempted by the Federal Arbitration Act and will lead to confusion and unnecessary litigation. Increased Labor Costs AB 1209 (Gonzalez Fletcher; D-San Diego) Public Shaming of Employers -- Imposes new data collection mandate on California employers to collect and report data to the Secretary of State regarding the mean and median salaries of men and women in the same job title and job description, determine which employees perform “substantially similar” work, and then have that report posted on a publicly accessible website, where such employers will receive undue scrutiny and criticism for wage disparity that is not unlawful and justified by a bona fide factor. SB 63 (Jackson; D-Santa Barbara) Imposes New Maternity and Paternity Leave Mandate — Unduly burdens and increases costs of small employers with as few as 20 employees by requiring 12 weeks of protected employee leave for child bonding and exposes them to the threat of costly litigation. Increased Unnecessary Litigation Costs SB 49 (de León; D-Los Angeles) Creates Uncertainty and Increases Potential Litigation Regarding Environmental Standards — Creates Uncertainty and Increases Potential Litigation Regarding Environmental Standards. Creates uncertainty by giving broad and sweeping discretion to State agencies to adopt rules and regulations more stringent than the federal rules and regulations in effect on January 19, 2017 through an expedited administrative procedure without public participation or input, when the State agencies determine that federal action leads to less stringent laws and regulations than those in effect on January 19, 2017; and increases the potential for costly litigation by creating private rights of action under California law, which may be triggered when a State agency takes the foregoing discretionary action. Tax Increases; Not Subject to Deadline The following nine tax-related job killer bills were not subject to the July 21 deadline. Although these bills aren’t moving in the Legislature, they could be taken up at any time before the end of the session.
Action Needed CalChamber is asking businesses to contact their legislators and urge them to oppose these job killers. California’s housing crisis is a big focus of attention at the State Capitol as studies highlight two elements of the crisis that are inextricably linked—supply and affordability. The Department of Housing and Community Development estimates that California must build at least 180,000 units a year to keep pace with demand, not accounting for the backlog of approximately 2 million units that has accrued over the last several decades. The supply shortage has sent home prices and rents soaring, resulting in many individuals and families being priced out of the market and leading to overcrowding, homelessness, substandard housing conditions, and an exodus of Californians to other states. For every $1,000 increase in a California home, 15,000 buyers are priced out of the market, according to a recent study by the National Association of Home Builders. Based on pending legislation, lawmakers are concentrating on things like local land use, funding affordable housing, or expedited permit processing. Local Land Use Decisions The Legislature will grapple to define the scope of the state’s role in local land use decisions. One of the driving issues in the crisis is the reluctance of local governments to approve new housing projects due to “not in my backyard” (NIMBY) resistance. Several bills have been introduced to hold local governments accountable for meeting their affordable housing elements. Such bills include SB 167 (Skinner; D-Berkeley) and AB 678 (Bocanegra; D-Pacoima), both supported by the California Chamber of Commerce. These bills require a local agency to make relevant findings if it denies a housing development, clarify provisions of the Housing Accountability Act (HAA), and impose added penalties on agencies that violate the HAA by failing to make appropriate findings. Another CalChamber-supported bill, AB 943 (Santiago; D-Los Angeles), seeks to increase the vote required to pass an ordinance that would reduce density or stop development or construction of parcels located less than one mile from a major transit stop, in an effort to limit the NIMBY effect. AB 1397 (Low; D-Campbell) further attempts to ensure that sites contained in a local government’s housing element can realistically be developed to meet the locality’s housing needs by requiring that such sites have sufficient infrastructure available to support housing development. Funding Affordable Housing Another focus is funding for state subsidies to develop affordable housing. The two bills getting the most attention are:
Other proposed funding methods include taxes:
Both these tax bills have been identified as job killers and have not moved through the legislative process at this juncture. While the state places significant focus on funding, according to the Legislative Analyst’s Office report, it would have to raise upwards of $250 billion to subsidize itself out of the housing crisis—a feat that cannot be accomplished. Permit Processing Several bills aim to streamline permit processing, which is much needed to stimulate development; however, the bills’ limitations or prevailing wage requirements make them unlikely to have much impact on the ground. Other bills attempt to relax rules for granny flats (accessory dwelling units) and home additions. Fortunately, three “wrong way” bills have been taken out of the equation.
Other Possibilities Three potential key factors in addressing the housing crisis that do not appear to be getting much attention are the potential for Proposition 13 property tax and CEQA reform, and revival of some version of California’s redevelopment agencies. Although there is no silver bullet to tackle the housing crisis, the Legislature will need to consider all available and possible avenues to increase supply to address the state’s housing crisis—the stimulation of actual construction being of the utmost importance. Louinda V. Lacey presents a recap of housing bills at the CalChamber Capitol Summit.
The California Chamber of Commerce is reminding employers with 10 or more employees that they are required to electronically submit employment tax returns, wage reports, and payroll tax deposits to the Employment Development Department (EDD). The requirement began January 1 for employers with 10 or more employees. All remaining employers are required to begin reporting and paying electronically with their 2018 payroll or as soon as they report having 10 or more employees, whichever happens first. Unemployment Insurance and Electronic Reporting AB 1245 (Cooley; D-Rancho Cordova, Statutes of 2015) requires electronic reporting for unemployment insurance reports submitted to the EDD. It also requires employers to remit contributions for unemployment insurance taxes by electronic funds transfer. Any employer required under existing law to electronically submit wage reports and/or electronic funds transfer to the EDD remains subject to those requirements. For more information, visit FAQs – E-file and E-pay Mandate for Employers. The EDD encourages employers to enroll in e-Services for Business to meet the requirement. For more information about the e-file and e-pay mandate, please visit: www.edd.ca.gov/EfileMandate Benefits of Electronic Filing and Payments
File and Pay Electronically with e-Services for Business Employers can use e-Services for Business to comply with the e-file and e-pay mandate. e-Services for Business is a fast, easy, and secure way to manage employer payroll tax accounts online. With e-Services for Business, employers can:
Waiver This mandate contains a waiver provision for employers who are unable to electronically submit employment tax returns, wage reports, and payroll tax deposits. The EDD began accepting waiver requests from employers in July 2016. To request a waiver, employers must complete and submit the E-file and E-pay Mandate Waiver Request (DE 1245W). Here are the ways to obtain a DE 1245W:
Waiver requests can be submitted by mail or fax: Mail: Employment Development Department Document and Information Management Center P.O. Box 989779 West Sacramento, CA 95798-9779 Fax: (916) 255-1181 Employers will be notified by mail if their waiver is approved or denied. An approved waiver will be valid for one year. Upon the expiration of the approval period, an employer must start to electronically file and pay, or submit a new waiver request to avoid a noncompliance penalty. Penalties for Not Complying with the E-file and E-pay Mandate Penalties will be incurred for noncompliance with this mandate. To avoid the penalties, enroll in e-Services for Business. |