CALIFORNIA INSURANCE Commissioner Ricardo Lara on May 31 approved all of the Workers’ Compensation Insurance Rating Bureau’s recommended changes to class codes for some electronics manufacturing sectors, as well as increases to the wage thresholds for construction industry dual classifications.
The following changes will take effect for policies incepting on or after Sept. 1, 2024:

Electronics manufacturing industry

One of the changes links two more classes to the 8874 companion classification, which was created in September 2022 to cover certain low-risk classes in the electronics industry group.
Currently, 8874 is a companion class that covers payroll for lower-risk jobs in hardware and software design and development, computer-aided design, clerical and outside sales operations for two electronics industry classes:
• 3681 (manufacturing operations for electronic
instruments, computer peripherals, telecommunications
equipment), and
• 4112 (integrated circuit and semiconductor wafer manufacturing).

Starting Sept. 1, similar low-risk white-collar personnel currently assigned to class 3572 (medical instrument manufacturing) and 3682 (non-electric instrument manufacturing) will be linked to the 8874 companion class code.

Dual-wage increases

The thresholds that separate high- and low-wage earners in 16 dual-wage construction classes are also increasing Sept. 1.
These class codes have vastly different pure premium rates for workers above and below a certain threshold as the lower-wage workers (often who are less experienced) have historically filed more workers’ comp claims.
Rates for lower-wage workers are often double the rates for higher-wage workers.

EVERY YEAR, bills passed by the state Legislature and signed into law by the governor take effect, and 2023 was a busy legislative session in Sacramento. The end result is another set of new laws that employers need to stay on top of in the New Year.

 

1. Sick leave law expanded
A new law that took effect Jan. 1 increased the amount of paid sick leave days California workers are eligible for to five days (40 hours), up from the current three, or 24 hours.
The new legislation applies to virtually all employees in the state. Under the law, businesses have two options for providing sick leave:
Up front: They can provide all five paid sick days up front for the year, and these days can be used immediately.
Accrual: They can build up paid sick leave by either accruing one hour of leave for every 30 hours worked, or providing 40 hours of leave by the 200th day of the year.

2. Pre-employment cannabis screening
Employers in California are no longer allowed to ask a job applicant about past cannabis use. The legislation, SB 700, bars employers from conducting pre-employment drug screenings for cannabis. In addition, the new law, which took effect Jan. 1, prohibits companies from penalizing workers for their off-the-clock cannabis use. Another measure, AB 2188, makes it unlawful for employers to “discriminate” against a person for failing a workplace drug test that only detects inactive cannabis compounds called metabolites.

3. FAIR Plan increases its limits
With more and more California businesses being forced to go to the California FAIR Plan for their property coverage, the market of last resort has increased its commercial property coverage limits to $20 million per location from the previous $8.3 million. This should bring a semblance of relief to companies located in wildfire-prone areas, who have seen their commercial
property insurance non-renewed and who have been unable to find replacement coverage.

4. Workplace violence law
A new law, which takes effect July 1, requires employers with at least one worker to have in place a workplace violence prevention plan, and conduct workplace violence prevention training
and keep a log of violent incidents in the workplace.

The prevention plan must include:
• Procedures for the employer to accept and respond to reports of workplace violence.
• Procedures to communicate with employees regarding workplace violence.
• Procedures for responding to workplace violence emergencies.

Employers will also be required to train their workers on the plan and on how to respond to violent incidents or threats of violence.

5. Treasury reporting rule
A new Treasury Department rule requires businesses with fewer than 20 employees and less than $5 million in revenue to report ownership and control information to the Financial Crimes
Enforcement Network (FinCEN) as part of an effort to cut down on fraud, money laundering and the funding of terrorism that could run through anonymous business entities.
The new rule was prompted by the passage of the Corporate Transparency Act enacted in 2021, but which took effect Jan. 1. Companies formed after Jan. 1 will have 30 days to file that
information with FinCEN. Existing companies will have to start filing that information starting Jan. 1, 2025.

6. No more non-competes
Under two new laws, non-compete agreements with employees are expressly illegal starting in 2024 and if an employer requires one be signed, it could provide grounds for a lawsuit by the worker. Here’s a rundown of the two laws:

AB 1076 – This law adds new requirements and penalties to existing cases that make it illegal for employers to include non-compete clauses in employment contracts or require an employee to sign a non-compete agreement that doesn’t meet exceptions under the law. The law also requires employers to notify current employees who signed non-compete agreements that they are now void
under California law by Feb. 14, 2024. This also applies to former employees who were hired after Dec. 31, 2021.

SB 699 – This legislation bars employers from enforcing a non- compete agreement that is void under state law. Most notably it would make void an agreement signed by an employee out of
state who later relocates to California. It also provides employees and job applicants a private right of action, including awards for injunctive relief, actual damages and attorney’s fees, and costs if an employer requires them to sign a non-compete. Additionally, it makes a violation of the statute an act of unfair competition — another possible legal risk.

7. New joint-employer rule
The National Labor Relations Board has issued a final rule that expands the definition of what’s considered a joint-employer relationship and increases employers’ potential liability.
Under the rule, two or more entities may be considered joint employers if they share one or more employees and they both can determine the workers’ essential terms and conditions of employment. If a company is deemed a joint employer with another entity, each can be held liable for labor law violations that the other commits.

The new NLRB rule applies to almost all industries, but will have the most effect on companies that use staffing or temp agencies, firms that are third party employers, and franchisors.
The rule took effect Dec. 26, 2023 on a prospective basis, meaning it applies to any cases filed on or after that date.

8. Reproductive-loss leave law
Starting Jan. 1, workers in the Golden State can take up to five days off for a “reproductive loss,” defined as a miscarriage, stillbirth, failed adoption or failed surrogacy experienced by an
employee, their spouse or partner. Under the new law, SB 848, workers are not required to take all five days consecutively, but they must use them all within three months of the event.
If an employee experiences two reproductive losses in a year, they will be eligible for 20 days off.

9. New telecommuter class code
If you have staff who work remotely, you’ll want to know that there is a new California workers’ compensation class code. After droves of employees starting working remotely after the
COVID-19 pandemic began in 2020, the Workers’ Compensation Insurance Rating Bureau created a new telecommuter class code (8871) and tethered its pure premium advisory rate to the 8810
clerical classification for easier administration.
Under Rating Bureau rules, code 8871 will receive its own rate which is 25% lower than the clerical rate. If you have remote workers, you’ll want to ensure they are in the telecommuter class
code to enjoy the lower premium.

10. Minimum wage hike
The state minimum wage increased at the start of 2024 to $16 from last year’s $15.50. While that wage is for the state, a number of cities and municipalities have minimum wage rates that are higher. Additionally, a new law, AB 1228, raises the minimum wage for fast food restaurant workers in the state to $20 an hour, starting April 1, 2024. This rate will increase annually through 2029 based on inflation. v

CALIFORNIA INSURANCE Commissioner Ricardo Lara has issued an order that cut the average advisory workers’ compensation benchmark rate across all classes by 2.6%, starting Sept. 1.

The benchmark rate, also known as the pure premium rate, is a baseline that covers just the cost of claims and claims adjusting, but not other overhead like rents, underwriting costs, and provisions for profit.

The rate is advisory, and insurers can use it as a guidepost for pricing their individual policies. Individual premiums that employers pay will depend on a number of factors, including the pure premium rate, the carrier’s own pricing methodology, and the employer’s claims and claims cost history, location, and industry.

Why the rate is falling

The insurance commissioner’s decision cuts the average published pure premium rate to $1.46 per every $100 of payroll, compared to the current $1.50.

Despite the average rate decrease of 2.6%, individual class codes may see swings as much as plus or minus 25%. Several factors are driving the lower rate decision:

• Slowing claims cost inflation
• Falling frequency of claims
• Lower overall claims costs
• Stable medical costs
• Fewer COVID-19 claims
• Lower claims-adjusting costs.

What insurers are doing

The most recently available industry average level of pure premium rates filed by insurers with the Department of Insurance is $1.71 per $100 of payroll as of Jan. 1, 2023, which is about 14.6% higher than the current published rate of $1.50. In 2022, carriers were charging $1.68 on average.

While the workers’ compensation market remains competitive and rates continue hovering around record lows, the final rate any employer will pay will depend on several factors beyond the pure premium rate. Some employers may see rate increases instead.

Factors that can influence the prices include the employer’s:

• Industry.
• Geographical location (employers in Southern California, for example, face a unique claims environment that results in a surcharge).
• Individual claims experience.

FLEET OPERATORS face an increased risk of potential liability if they are not diligent about checking their drivers’ moving violation records with the state Department of Motor Vehicles, in addition to the Federal Motor Carrier Safety Administration’s Drug and Alcohol Clearinghouse.

As of 2020, it became mandatory that all motor carriers sign up their drivers in the Clearinghouse and run their driver rosters through the system to clear them for duty. But many companies are skipping this step and only checking their drivers’ records with the DMV, which may not reflect any suspensions issued by the Clearinghouse.

Clearinghouse rules require that drivers be tested for drugs prior to being hired and randomly throughout the year. This helps employers weed out drivers who may be at higher risk of both moving violations and accidents.

The Clearinghouse

The Clearinghouse was created to keep commercial drivers who have violated federal drug and alcohol rules from lying about those results and getting a job with another motor carrier.
This electronic database tracks commercial drivers’ license holders who have tested positive for prohibited drug or alcohol use, as well as refusals to take required drug tests, and other drug and alcohol violations.

The Clearinghouse tracks a driver’s drug and alcohol tests and bars them from operating commercial vehicles after they fail a test. If they want to return to driving, they must successfully pass a return-to-duty process that includes substance abuse treatment and a test to evaluate their readiness.

The restriction can be lifted if the driver signs up for a Clearinghouse program that will test them 14 times in two years, with the first 12 tests having to occur in the first year.
This cost all comes out of the driver’s pocket.
This system is an important check on drivers and helps employers reduce their exposure.
The Department of Motor Vehicles is required to check the Clearinghouse before issuing a new or renewing a commercial driver’s license.

The takeaway

While it is the law that employers follow Clearinghouse procedures, because it’s a new system, many companies are failing to follow the rules.
If you are relying only on pulling a driver’s moving violation record and not the Clearinghouse, you are in breach of regulations and could leave your firm exposed.
If you employ a driver who is under suspension from driving by the Clearinghouse and they are involved in an accident, the victims could build a case that your organization was negligent in letting the individual drive and not checking the Clearinghouse first.
If they can prove negligence on a fleet operator’s part, the business could be in for a hefty court judgment.

THE U.S. Department of Labor has issued its long-awaited proposed changes to the nation’s overtime rules for American workers, proposing to increase the threshold for exempt status by more than 50% to just over $55,000.

Under DOL rules, workers who are exempt from overtime rules — typically managers, executives, and certain administrators — must make at least the threshold amount, which is currently $35,568.

If the new threshold goes into effect, employers will have a choice to either raise the pay of their currently exempt staff to the new threshold (or above) or change those workers to non-exempt, meaning they must be paid overtime wages (typically time and a half) if they work overtime.

It’s rumored this proposal is on a fast track and that it could become permanent in the next few months, giving employers a short window to make changes.

Title alone does not designate someone as “exempt.” There is a two-pronged test for classifying a worker as exempt from overtime pay:

• Their salary, which will have to be $55,068 per year, under the rule.
• The duties test, which outlines exactly what someone’s duties must be in order to qualify for exempt status (see box in the column on the right).

 

 

 

 

 

 

 

 

 

 

 

 

 

How to prepare

Start by making a list of all your current exempt employees who earn between $35,568 and $55,068 a year.
You will have a decision to make about these workers:

• Raise their salaries to meet the new threshold, or
• Change them to non-exempt status so they are eligible for overtime pay if they work extra hours. You’ll also have to put in place systems for tracking their hours worked, including overtime.

Also, you may have to change benefits for anyone whose status changes. You should plan how you are going to communicate these changes to your workforce.

If you have staff who work remotely, you’ll want to pay attention to changes that are coming to the workers’ compensation class code you use for them.
Starting Sept. 1, California’s telecommuter class code will finally get its own pure premium rate, that is lower than what’s currently being charged.
Since many people started working remotely after the COVID-19 pandemic began in 2020, the Workers’ Compensation Insurance Rating Bureau created a new telecommuter class code (8871) and tethered its pure premium advisory rate to the 8810 clerical classification for easier administration.
Now, under the Rating Bureau’s workers’ compensation regulatory filing which was adopted by the California Department of Insurance on May 25, code 8871 will receive its own rate, separate from the clerical rate. In fact, the new telecommuter rate will be 25% lower than the clerical rate due to the former’s lower losses and higher average payroll.
If you have remote workers, you’ll want to ensure they are in the telecommuter class code to enjoy the lower premium.

New X-Mod threshold

The approval of the filing also increases the workers’ comp premium threshold for experience rating (being eligible for an X-Mod) to $10,200 from $9,200 to account for wage inflation.

Restaurant classification split

Other changes include splitting the 9079 restaurant classification into six new codes (see box below), effective Sept. 1, 2024.
While there will be six codes, they will still be combined for rate-making purposes until the Rating Bureau collects a few years of data from the new codes, so that it can set individual rates
for each of them.

THE NATIONAL Labor Relations Board has issued a decision that non-disparagement and confidentiality clauses in employee severance agreements are illegal.
The board ruled that these provisions stifle employees’ and ex-employees’ rights under Title 7 of the National Labor Relations Act to discuss work and their employer with one another, among other things.
Since the NLRB’s decision applies to both unionized and non-unionized workers, legal experts advise all employers to revisit their severance agreement templates. However, the decision only covers employees – and not severance agreements for supervisors or managers, who are not afforded rights under Title 7.
Decision is far-reaching In the case before the NLRB, an employer decided to lay off a group of union workers and offered them a severance agreement that included them receiving additional months of pay and benefits depending on their tenure with the company.
It also included a standard confidentiality clause and non-disparagement clause that is found in many severance agreements:

Confidentiality Agreement. “The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.”

Non-Disparagement Agreement. “At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents, and representatives.”

The ruling

The board ruled that merely including non-disparagement and non-disclosure agreements in severance agreements constituted unfair labor practices under Title 7, which guarantees employees (in part):

“The right to self-organization … and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
Translation: Workers have the right to discuss their jobs and even complain about their employer and management to one another.

The takeaway

The ruling may be appealed, but for now it stands and is not on hold. The decision will affect employers in virtually every industry and regardless of whether they have union workers or not.
If you plan to continue using severance agreements going forward, you should consult your legal counsel, particularly if your current agreements contain the clauses that offended the NLRB.

A NEW STATE law that allows for digital license plates to be installed on vehicles in California, may have created a privacy nightmare for employers.
The Motor Vehicle Digital Number Plates Act, which took effect Jan. 1, enables fleet and commercial vehicle owners to purchase and install digital license plates and soon-to-be-approved alternative devices for tags, stickers, tabs, and registration codes that can track vehicles and make registration easier.
The new law has significant implications for fleet and commercial vehicle owners that want to track vehicles using a digital license plate or alternative GPS device, and they will need to follow the law’s driver disclosure requirements to avoid fines.

What employers can and can’t do

The law allows fleet and commercial vehicle owners to track vehicles through the digital license plate as long as it is “strictly necessary for the performance of the employee’s duties.” Employers may only monitor them during work hours.
If you choose to monitor employees, you are required to provide them with a notice, which under AB 984 must – at a minimum – include the following:

• A description of the activities that will be monitored.
• A description of the worker data that will be collected.
• A notification of whether the data gathered through monitoring will be used to make or inform any employment-related decisions, including disciplinary and termination decisions.
• A description of the vendors or other third parties, if any, to which information collected through monitoring will be disclosed or transferred.
• Names of personnel authorized to access the data.
• Dates, times, and frequency of monitoring.
• Where the data will be stored and for how long.
• A notification of employees’ rights to disable monitoring, including vehicle location technology, outside of work hours.

Firms that violate the law can be subject to:

• Civil penalties of $250 for the initial violation, and
• $1,000 per employee for each subsequent violation.

For subsequent violations, penalties will be calculated per employee, per violation, and per day an employer monitors its workers without proper notice.

The takeaway

With potential civil penalties at stake, employers that want to use these plates should tread carefully, legal experts say.
If you want to use them, you should revise your employee handbook to include the required notice. Additionally, if you plan to monitor employees using these plates, ensure you get their signatures on the disclosure form.
Be aware that you may need to comply with other legal requirements to protect your employees’ privacy, including how you handle, store, and convey data from the plates.

 

A U.S. COURT of Appeals has struck down a landmark California law that prohibits employers from requiring their workers to sign agreements to arbitrate any disputes arising from their employment.
The ruling clears the way for employers to continue using arbitration agreements without risking criminal liability that the law – AB 51 – calls for. The law took effect Jan. 1, 2020, but after a coalition of employers led by the California Chamber of Commerce sued to block the measure’s implementation, a lower-court judge issued a temporary restraining order, halting enforcement until the matter could be resolved by the courts.
Arbitration agreements usually require both the employer and employee to submit any employment-related disputes to arbitration, rather than to the traditional court process. They are designed to reduce tension and save both parties money and time.
The Chamber said the Feb. 15, 2023 ruling by the Ninth U.S. Circuit Court of Appeals invalidating the law was a win for the state’s employers. The business advocacy group had asserted that the law contradicted federal legislation and would result in increased litigation and higher costs for employers and workers alike.
The ruling by the Ninth Circuit upheld a lower court’s preliminary injunction order and holding that AB 51 is preempted by the Federal Arbitration Act (FAA).

What did AB 51 require?

The law made it a criminal misdemeanor for an employer to require an existing employee or a job applicant to sign an arbitration agreement as a condition of employment.
However, due to a quirk in the law, even though an employer could be subject to criminal prosecution if it required employees to sign arbitration agreements, the contracts, if signed, would still be enforceable.
The law was written in this way to avoid conflicting with the FAA. But in the end, the court opined that AB 51 was preempted by the federal law after all.

The takeaway

The ruling paves the way for employers to continue using arbitration agreements with employees in the Golden State. That said, if you are using such agreements or plan to, you should consult with your legal counsel to ensure your agreement is up to date.
If the case is not appealed, the court’s opinion will likely lead to the law being nullified.
But an appeal would be an uphill battle, legal observers say. “SCOTUS (the U.S. Supreme Court) has clearly said that state rules burdening the formation of arbitration agreements are at odds with the FAA,” the law firm of Fisher Phillips wrote in a blog about the ruling.
One important note: The Ninth Circuit’s decision does not affect the federal Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, which gives employees the right to opt for arbitration agreements and class- or collective-action waivers if they are making sexual assault or sexual harassment claims.

A slew of new laws and regulations that will affect California businesses are taking effect for 2023.

Last year was a busy one, with ground-breaking new laws on employee pay disclosures, a law prohibiting discrimination against cannabis-using employees and another expanding the circumstances when employees can take leave to care for a loved one. The following are the top 10 laws and regulations that employers in the Golden State need to stay on top of.

1.  Pay disclosure

This sweeping law in part requires more disclosure of pay information by employers. Under current law, employers are required to provide the pay scale for a position upon reasonable request by a job applicant. SB 1162 goes a step further by:

• Requiring employers, upon request by a current employee, to provide the pay scale of the position they are employed in.
• Requiring employers with 15 or more workers to include pay scale in any job postings for open positions.
• Requiring employers to maintain records of job titles and wage rate history for each employee while employed for the company, as well as three years after their employment ceases.

Note: The law defines “pay scale” as the salary or hourly wage range that the employer “reasonably expects” to pay for the position. Penalties range from $100 to $10,000 per violation. This law took effect Jan. 1, 2023.

 

 2.  State of emergency and staff

This new law, SB 1044, bars an employer, in the event of a state of emergency or emergency condition, from taking or threatening adverse action against workers who refuse to report to, or leave, a workplace because they feel unsafe. “Emergency condition” is defined as:

• Conditions of disaster or extreme peril to the safety of persons or property caused by natural forces or a criminal act.
• An order to evacuate a workplace, worksite or worker’s home, or the school of a worker’s child due to a natural disaster or a criminal act.

SB 1044 also bars employers from preventing employees from using their mobile phones to seek emergency assistance, assess the safety of the situation or communicate with another person to confirm their safety. The law, which took effect Jan. 1, 2023, does not cover first responders and health care workers.

 

3. Cannabis use and discrimination

This law bars employers from discriminating in hiring, termination or other conditions of employment based on employees using cannabis while off duty. The bill’s author says the legislation is necessary because THC (tetrahydrocannabinol), the active ingredient in marijuana, can stay in a person’s system after they are no longer impaired. As a result, drug testing may detect THC in an employee’s system even if they used it weeks earlier and it is having no effect on their job performance. AB 2188 does not require employers to permit employees to be high while working. The bill would exempt construction trade employees and would not preempt state or federal laws that require employees to submit to drug testing. This law takes effect Jan. 1, 2024.

4.  Leaves of absence

The California Family Rights Act and the state’s paid sick leave law allow employees to take leave to care for a family member, defined as a spouse, registered domestic partner, child, parent, parent-in-law, grandparent, grandchild or sibling. The definition has been expanded to include “any individual related by blood or whose association with the employee is equivalent of a family relationship.”

5.  Contractor workers’ comp

Starting July 1, the following contractors must carry workers’ compensation coverage regardless of if they have employees or not:

• Concrete (C-8 license)
• Heating and air conditioning (C-20)
• Asbestos abatement (C-22), and
• Tree service (D-49).

Starting Jan. 1, 2026, all licensed contractors must have coverage.

6.  OSHA citation postings

Under current law, employers that receive citations and orders from OSHA are required to post them in or near the place the violation occurred, in order to warn employees about a potential hazard. Starting Jan. 1, 2023, they must post the notice not only in English, but also: Spanish, Chinese (Cantonese, Mandarin), Vietnamese, Tagalog, Korean, Armenian and Punjabi.

7.  Permanent COVID standard

Cal/OSHA has a permanent COVID-19 prevention standard that will sunset in 2024. The new standard, which replaces the temporary emergency standard the agency had implemented, should provide more certainty for prevention procedures and practices. Here are the main takeaways:

• Employers are no longer required to pay employees while they are excluded from work due to COVID-19, or to screen employees daily.
• Employers must still notify and provide paid testing to employees who had a close contact in the workplace.
• Employers can now incorporate written COVID-19 procedures into their Injury and Illness Prevention Programs.

8.  CalSavers expanded

SB 1126 requires any person or entity with at least one employee to either provide them with access to a retirement program like a 401(k) plan or enroll them in the state-run CalSavers program. Prior to this new law only companies with five or more employees that do not offer a retirement plan are required to enroll their workers in CalSavers.

9.  Bereavement leave

Employers with five or more workers are required to provide up to five days of bereavement leave upon the death of a family member, under a new law starting in 2023. This leave may be unpaid, but the law allows workers to use existing paid leave available to them, such as accrued vacation days, paid time off or sick leave. Employers are authorized to require documentation to support the request for leave.

10.  PFL wage replacement

This law was passed last year but does not take effect until 2025. Existing California law allows employees to apply for Paid Family Leave and State Disability Insurance, both of which provide partial wage replacement benefits when employees take time off work for various reasons under the California Family Rights Act. Starting in 2025, low-wage earners (those who earn up to 70% of the state average quarterly wage) will be eligible for a higher percentage of their regular wages under the state’s PFL and SDI benefit programs.