New Laws Drive Up Employer Costs, Insurance Premiums
By HOWARD FINE
Companies are bracing for fallout from a slew of new laws, many of which will add to the cost of doing business in California.
An increase in workers’ compensation and unemployment insurance benefits took effect on Jan. 1, as did a temporarily end to business tax credits. Other changes include raising the bar for employers to have lawsuits dismissed, new layoff notice rules and flexibility for local officials to pass labor standards.
Some new laws may help business. Among those are a ban on “junk faxes” and a pact to limit construction-defect suits that have plagued homebuilders.
But most of new laws are likely to have adverse impacts, costing businesses time and money and bolstering those who say the state has become less business friendly.
Topping the list is the hike in workers’ compensation benefits. Assembly bill 749 (authored by Senate President John Burton, D-San Francisco) was hastily passed last February after Gov. Gray Davis switched tacks and backed a hike.
The law raised the maximum weekly benefit for injured workers from $490 to $602. Two more increases, to $728 and $840, kick in for 2004 and 2005.
While the hikes aren’t supposed to be felt until claims payouts are made, employers already are seeing higher insurance premiums. In many cases, policy renewals are running 50% higher than last year.
“This is huge on the Richter scale of impact to employers,” said Fred Main, senior vice president of the California Chamber of Commerce.
The other high-profile law passed last year,Senate bill 1661 setting up a paid family leave program,doesn’t kick in until next January. That’s when workers start adding to the state insurance fund to finance the program.
Actual paid leaves can’t be taken until after July 1, 2004. Employers likely will have to hire and train temporary workers to replace those on leave.
Employers are now feeling the pinch from higher unemployment insurance benefit levels under Senate bill 40 passed in 2001. The maximum weekly benefit rose on Jan. 1 from $330 a week to $370 per week; that’s on top of an even bigger increase (from $230 a week to $330 a week) taking effect on Jan. 1, 2002.
Again, the main impact on employers is coming not from the benefit increases themselves but from insurance premiums. Thanks to both the higher benefit levels and increased usage of the unemployment insurance fund in a sluggish economy, employers now pay an average of $21 more per worker into the state-run insurance fund.
Higher taxes also are on the way,even for businesses that posted 2002 losses. That’s because Gov. Davis pushed through the Legislature a two-year suspension of tax credits for companies posting losses. In succeeding years, money-losing companies will be able to claim more in tax credits.
Among other laws that could have negative impacts is Assembly bill 2509 (by Hollywood-area Democrat Jackie Goldberg), which allows local governments to set their own stiffer labor rules.
“This will open the doors to having localities make their own wage standards, much as Santa Monica has tried to do with its living wage proposal,” said Matt Bartosiak, manager of the consulting help line at the Los Angeles-based Employers Group.
Another law, Senate bill 688, increases the time for objections to be raised in court when an employer moves to have a case summarily dismissed. (When confronted with what employers perceive as frivolous claims, they move to have cases dismissed immediately.)
Now plaintiffs have 28 days to respond to a summary judgment. Senate bill 688 increases that to 75 days.
On workplace injuries, employers now face tougher notification rules. Under Assembly bill 2837, an employer must notify the California Occupational Safety and Health Administration within eight hours of the initial occurrence of a serious injury or accident. Failing to do so can cost to $150,000.
Under Assembly bill 2412, which took effect on Jan. 1, current and former employees now have greater access to their payroll records.
While this might impose some added paperwork, the main impact is likely to be felt by those employers who don’t get the records to workers within 21 calendar days. Those employers now are subject to civil penalties.
Employees stand to gain Assembly bill 1401, which extends so-called COBRA benefits from 18 to 36 months.
Employees who lose health benefits (primarily after losing a job) can have those benefits extended from the same insurer at roughly the same rate paid by the employer.
This law is expected to impact healthcare providers, who may pass some of the costs on to employers in the form of higher premiums. But the impact on employers themselves is expected to be minimal.
Fine is a staff writer with the Los Angeles Business Journal
