Bad Hangover: Employers Brace for Slew of New Laws
By HOWARD FINE
Employers in California may not know it, but they face a raft of new laws that took effect Jan. 1 and that are likely to hit them where it hurts,in the pocketbook.
Among them: a sweeping paid family leave program, major increases in unemployment insurance costs and an expansion of sexual discrimination laws to include cross-dressers.
Many of these laws were passed in the final frenetic hours of the legislative session this past summer but were overlooked as the spotlight turned to the recall election and the candidacy of Gov. Arnold Schwarzenegger.
Also stealing the limelight were major business issues such as the crisis in workers’ compensation and the battle over Senate Bill 2, the employer mandated healthcare bill.
For employer groups, such as the California Chamber of Commerce, there was hope that Schwarzenegger’s executive order suspending regulations for new laws would spare employers from the impact. But most of the major new pieces of legislation that kicked in this year don’t need implementing regulations.
“Many employers are going to be caught flat-footed with these new laws,” said Margaret Grover, a partner with Haight Brown & Bonesteel LLP in Los Angeles.
The biggest immediate hit to companies’ bottom lines will come from shoring up the state’s Unemployment Insurance Trust Fund, which needs a $2 billion infusion this year or it will run dry.
In the past three years, a combination of benefit increases to unemployed workers and a slow economy has drained the employer-supported fund, resulting in hikes that average $136 per worker in 2004.
Employers who have pink-slipped workers could be charged up to $300 per employee.
“The cost of laying off these people has just gotten a lot more expensive,” said Sarah Rios, manager of unemployment insurance services for the Employers Group, a Los Angeles consulting service.
Under the new family leave law, starting at mid-year workers will be allowed to take up to six weeks off with pay to tend to family matters.
But the paycheck effect starts Jan. 1, when workers will start seeing higher deductions for disability insurance. The increase will be slight, averaging out to about $10 per year.
The family leave pay, ranging from $50 per week to a maximum of $728, will be paid by the state’s disability insurance fund, so employers won’t feel much of a direct hit,yet.
There is a lingering concern that the employee contributions may not be enough to cover the cost of the program.
“Our big fear is that two or three years from now, when it becomes clear that the system is underfunded, the Legislature is going to come back and say, ‘OK employers, it’s your responsibility to make up for the shortfall,'” said Michael Shaw, assistant state director of the National Federation of Independent Business.
In the meantime, there will be some adjustments to make and possibly related costs for employers, such as increased paperwork, Shaw said.
Payroll programs need to be altered, and information packets must be distributed to all new hires explaining the new paid leave program.
The main issue, though, will be preparing policies on how to handle leave requests and readjusting the workplace when employees begin to take paid leaves in July.
Workplace consultants expect a surge in leave requests.
Coping with them may prove difficult, especially for smaller companies. One provision of the law could help stem requests at businesses with fewer than 50 people: There, the law does not guarantee the employee’s job will be held open upon his or her return.
The most unusual new law is Assembly Bill 196, which expands the definition of sexual discrimination to include gender identity, where individuals undergo medical procedures to change their gender or are cross-dressers.
Grover said a typical case might involve bathrooms. An employee who switches from male to female may want to use the women’s restroom or have a restroom to themselves. Under the new law, the employer must find a reasonable accommodation to that request.
“Very few employers have given this any thought at all,” she said. The courts likely will be called in to determine what constitutes “reasonable accommodation,” she said.
Several other new laws that kicked in Jan. 1 could hinge upon lawsuits. One is Assembly Bill 76, which makes employers liable for sexual harassment of employees by third parties, such as customers, contractors or delivery persons.
In coming weeks, Grover said employers should be revising their employee handbooks and placing posters notifying employees what action they will take to investigate third-party harassment claims.
But many employers probably won’t take further steps until the law is tested in the courts, Grover said. The main issue likely will center on how much an employer must do.
Meanwhile, employers will also have to guard against a predicted slew of lawsuits filed under Assembly Bill 796, which has been dubbed the “bounty hunter law.”
In the past, only regulatory agencies can enforce labor and workplace safety laws and bring lawsuits to force employer compliance. AB 796 allows employees to file these lawsuits and get a 25% share of any civil penalty.
Proponents say the law is necessary because regulatory agencies often are slow to respond to workplace complaints. But business advocates say the law will spur attorneys to file lawsuits hoping to snag a share of the penalty awards.
“This is an open invitation to bounty-hunting attorneys coming in and trying to drum up new cases,” said Fred Main, senior vice president of the California Chamber of Commerce.
A similar law, Senate Bill 777, aims to crack down on employer retaliation for workplace complaints. This so-called “whistleblower law” puts the burden on the employer to prove that a disciplinary action against an employee who has reported a workplace violation is not retaliatory.
The burden of proof was on the employee under former guidelines. The law also requires employers to post the hotline number to the state attorney general’s office to report workplace violations.
“This should make companies more cautious about people who raise complaints in the workplace,” Grover said. “It could also be abused, though, by employees who claim that a series of perfectly legitimate actions represent a pattern of harassment or discrimination.”
Finally, a new workers’ compensation law could open employers up to lawsuits. Under Senate Bill 228, when an employer switches workers’ compensation insurance carriers, the new carrier must evaluate the employer’s injury and illness prevention program.
“Many employers don’t even have injury and illness prevention programs, even though a law passed 10 years ago requires every employer to have one,” said Scott Hauge, a Bay area insurance agent and small business advocate. “That means when they shop around for workers’ compensation insurance, they’re going to have to scramble to put one together.”
Hauge said that insurers will likely charge their employer policyholders $500 to $1,000 to evaluate the program.
But that’s the least of an employer’s worries.
“If the insurer does an evaluation of the injury and illness prevention plan and finds deficiencies, that could open up employers to SB 796 lawsuits,” Hauge said.
Fine is a staff reporter at the Los Angeles Business Journal. Staff reporter Sherri Cruz contributed to this story.
Going Up
Employers face new costs on a number of fronts
& #149; Unemployment insurance: employers charged $100 to $300 per worker to shore up the state’s nearly bankrupt Unemployment Insurance Trust Fund
& #149; Sexual harassment: employer liable if worker alleges harassment by customer, contractor, other third party
& #149; “Bounty hunter” law: workers suing for workplace violations are entitled to portion of levied penalties
