With more and more California businesses being forced to go to the California FAIR Plan for their coverage, the market of last resort has moved to increase its commercial property coverage limits significantly.

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. The decision comes as commercial property rates continue rising due to inflationary pressures, but in particular for companies located in areas that are considered urban-wildland interfaces.

Insurers have pulled back on underwriting commercial properties as well as homes in these areas. They’ve taken a number of actions, including:

• Retreating from the California market altogether.
• Selectively underwriting properties that are not considered at-risk.
• Capping their exposures by only covering a set number of properties.
• Requiring property owners to create defensible spaces and take other measures to harden their properties against wildfires.
• Raising rates significantly.

Businesses whose policies are not renewed and who can’t find coverage in the market are able to go to the FAIR (Fair Access to Insurance Requirements) Plan for coverage. This is the market of last resort and premiums can be substantial, while the policy limits have often been inadequate to cover the full cost of the commercial enterprise’s property.

 

Policies cover damage caused by:

• Fire
• Lightning
• Internal explosion

Optional coverages are available at an additional cost, such as coverage for vandalism and malicious mischief.
If you have to go to the FAIR Plan, we can arrange for a “differences in conditions” policy that will cover the areas in which the plan is deficient compared to a commercial property policy.

The FAIR Plan will cover the following commercial structures:

Habitational buildings – Buildings with five or more habitational units such as apartment buildings, hotels, or motels.
Retail establishments – Shops such as boutiques, salons, bakeries, and convenience stores.
Manufacturing – Companies that manufacture most types of products.
Office buildings – Offices for professionals such as design firms, doctors, lawyers, architects, consultants, or other office-based functions.
Buildings under construction – Residential and commercial buildings under construction from the ground up.
Farms and wineries – Basic property insurance for commercial farms, wineries, and ranches, not including coverage for crops and livestock.

Cal OSHA has proposed its long-awaited indoor heat illness prevention standard as increasingly hot summers are affecting workers in indoor spaces like warehouses, production operations,
restaurants and more.
The proposed standard, largely based on the state agency’s outdoor regulations, will require employers whose workplaces at times are at least 82 degrees to have a written Indoor Heat Illness Prevention Plan.
The standard, once it takes effect, will affect employers throughout the state and many will have to take steps and invest in equipment and planning to ensure compliance. The preventative measure to which most employers will likely resort is air-conditioning.
The Standards Board wrote in its proposal, according to the Cal-OSHA Reporter trade publication: “There is likely to be a particular need to reduce temperatures in large warehouses, manufacturing and production facilities, greenhouses, and wholesale and retail distribution centers.”
Other facilities that would likely also need to install HVAC units include restaurant kitchens and dry cleaners. They may also need to improve air circulation in their operations.
Under the proposal, the following regulations apply to a workplace where the indoor temperature exceeds 82 degrees.

Access to drinking water

Employers are required to provide access to potable water that is fresh, suitably cool, and free of charge.
It must be located as close as practicable to the work area, as well as indoor cool-down areas where employees can rest. If an employer doesn’t provide water continuously, it will be required to provide at least one quart per hour per employee per shift.
Employers should encourage frequent water consumption.

Access to cool-down areas

Employers must provide at least one cool-down area during shifts, and grant a cool-down break to staff who ask for one.
Workers taking cool-down breaks shall be monitored and asked to stay in the area if they are experiencing heat illness symptoms. As long as symptoms persist, they may not be ordered back to the work they were doing.

Control measures

Employers can implement a number of measures to protect their workers:
Engineering controls – This can include barriers between heat sources and employees, isolating hot processes from workers, air-conditioning, cooling fans, mist fans, swamp coolers, ventilation, etc.
Administrative controls – This can include limiting exposure by adjusting work procedures, practices, or schedules (working during cooler periods, using work/rest schedules, or reducing the speed of work).
Personal heat-protective equipment – This could include water- and air-cooled garments, cooling vests, and more.

Emergency response procedures

Employers will need to develop and have in place emergency response procedures that workers and supervisors can follow in case they are experiencing heat illness.

Acclimation steps

Employees should be closely observed during heat waves, and new workers must be closely observed during their first 14 days of work to ensure they are acclimating.

Training

Employees and supervisors will need to be trained on:

• Personal risk factors for heat illness.
• Their employer’s procedures for complying with the regulation.
• The importance of frequent water consumption.
• The importance of acclimation.
• Signs and symptoms of heat illness, and first aid or emergency response procedures.

The Equal Employment Opportunity Commission has issued new guidance on how employers can properly use software, algorithms and artificial intelligence-driven decision-making tools when screening job applicants and selecting candidates.
The EEOC has grown concerned about possible adverse impacts of these technologies that can help employers with a wide range of employment matters, like hiring decisions, recruitment, retention, monitoring performance, and determining pay, promotions, demotions, dismissals and referrals.
The guidance follows the EEOC’s recent announcement that it would pursue enforcement of violations of Title VII of the Civil Rights Act of 1964 and other statutes under its jurisdiction arising from use of AI in employment decisions.

The new guidance includes a series of questions and answers to help employers prevent the use of AI and other technologies from leading to discrimination on the basis of on race, color, religion, sex or national origin, in violation of Title VII.

Main points of the guidance:

Responsibility: Employers are ultimately responsible for discriminatory decisions rendered by algorithmic decisionmaking tools, even if they are administered by another entity,
such as a software vendor.
Assessment: Employers should assess whether their use of technology has an adverse impact on a particular protected group by checking whether use of the procedure causes a selection rate for individuals in the group that is “substantially” less than the selection rate for individuals in another group.

The selection rate for a group of applicants or candidates is calculated by dividing the number of persons hired, promoted or otherwise selected from the group by the total number of candidates in that group.
If an employer is in the process of implementing a selection tool and discovers that using it would have an adverse impact on individuals of a protected class, it can take steps to reduce
the impact or select a different tool, per the guidance.
If an employer fails to adopt a less discriminatory algorithm than that which was considered during the implementation process, it could result in liability, according to the EEOC.

The takeaway

Employers using algorithmic decision-making tools for employment decisions need to take the same care as they do when making employment moves without assistance from technology.
Firms should not implement these technologies without considering possible adverse decision-making that could lead to violations of the law and prompt litigation and regulatory
action by the EEOC.
Experts advise that you move forward carefully and work with the vendor to ensure the technology doesn’t get your organization in trouble.

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.

ONE OF THE most common construction industry accidents is falls from heights, which is why it’s crucial that you have in place fall protection systems for your workers.
One of the best ways to prevent injuries and death from falls is by using a fall-arrest system. But while these systems can save lives, they can cause suspension trauma if the worker is not rescued and brought to ground level as soon as possible and is instead left suspended in an upright position, with their legs dangling.
Because the worker is suspended in an upright position with their legs hanging, blood begins to accumulate in the legs.
This is commonly called venous pooling (the accumulation of too much blood in the veins), which reduces the flow of oxygenated blood to the heart and brain.
Remaining in this position for a long time can cause the worker to pass out and the longer they hang in place, the more it can result in serious health problems – and even death.

How to avoid suspension trauma Safe, prompt rescue is the key to preventing suspension trauma. The sooner a worker can be rescued, the less likely they are to endure such trauma.
During the rescue, care should be taken to slowly put the victim back on the ground. Try to avoid suddenly letting them into a horizontal position, which can cause deoxygenated blood to flow back into the body (reflow syndrome) and cause damage to the brain and other organs – and even cause the heart to stop.
Suspended workers awaiting rescue can take some action to guard against injury, including:

• Adopting a sitting position, if possible.
• Moving into a horizontal position as much as possible.
• Using their legs to push off from a hard surface, keeping the muscles active.
• Pumping legs frequently to maintain blood flow and prevent venous pooling.

One of the primary ways to slow the progression of suspension trauma is to stand up. When standing, the leg muscles must contract to provide support and maintain balance and these actions also put pressure on the veins. This pressure, along with a series of one-way valves in the veins, helps blood get to the heart and reduces the amount of blood pooling in the legs.
Workers can “stand” by using the trauma-relief straps that are attached in pouches on the side of the fall-arrest harness. When suspended, the worker can deploy the trauma-relief straps, which provide a loop that they can put their feet into and press against to simulate standing up.

 

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 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.

GOVERNOR GAVIN Newsom has signed into law legislation that would bar employers from discriminating against employees and job applicants who use cannabis on their time off.
The law amends the California Fair Employment and Housing Act to prohibit discrimination against an individual based on “an employer-required drug screening test” that detects
the presence of “nonpsychoactive cannabis metabolites in their hair, blood, urine, or other bodily fluids.”
The new law does not bar employers from drug-testing, but it does impose restrictions on what they can do in response to a positive test.
The law, AB 2188, prohibits employers from discriminating against employees and job prospects, or otherwise penalizing them for either:
• Their use of cannabis off the job and away from work, or
• An employer-required drug test that detects cannabis in their system (from either a hair, blood, urine or bodily fluid sample).

Employer rights

The law is not a green light for workers to use or possess cannabis on the job. Also, it won’t impinge on an employer’s rights to maintain a drug-free workplace.
They do also have some leeway in trying to judge someone’s impairment, but it comes down to the type of test they use.

Acceptable tests

There are two types of tests:
• Ones that detect the presence of tetrahydrocannabinol (THC), the chemical compound in cannabis that causes impairment and psychoactive effects.
• Ones that detect the presence of nonpsychoactive cannabis metabolites, which is what is left after the body metabolizes THC. These metabolites do not indicate that an individual is impaired, but only reveal whether they have consumed cannabis recently (up to a month in the case of a urine test).
Under the new law, employers would be authorized to take disciplinary action if a THC test is positive, but not if they detect nonpsychoactive cannabis metabolites in their system. The latter is the more common type of test available.

Exemptions

There are some exemptions in AB 2188, in particular:
• It does not apply to workers in the building and construction trades. Employers would still be allowed to make employment decisions for workers and applicants who use cannabis in their off hours and test positive for nonpsychoactive cannabis metabolites.
• The law does not apply to applicants or employees hired for positions that require a federal government background investigation or security clearance in accordance with regulations issued by the U.S. Department of Defense or other federal agencies.
• The law does not preempt state or federal laws requiring applicants or employees to be tested for controlled substances as a condition of employment, receiving federal funding or federal licensing-related benefits, or entering into a federal contract.

The takeaway

Employers have time to change any policies they have in place concerning drug-testing and cannabis use. The law takes effect Jan. 1, 2024.
Remember, you can still take action against someone who is impaired at work.

THE U.S. Supreme Court’s decision to not hear an appeal of the sweeping California independent contractor law known as AB 5 is likely to cause serious personnel headaches for motor carriers in the Golden State.
While the law is already in effect, there had been an injunction exempting trucking companies after the California Trucking Association had sued to overturn the law as it applies to the industry.
The Supreme Court’s decision effectively lifts the injunction, and the CTA is sounding the alarm on how it will wreak havoc on motor carriers.

The effects

Owner-operators who are classified as employees under this test will be covered by California labor and employment laws. The hiring entity will have to treat them like employees, meaning they have to secure workers’ compensation coverage, pay employment taxes and extend benefits to them. They also have to abide by labor laws and wage and hour statutes.

Here’s how AB 5 will affect various owner-operators:

Exclusive leased owner-operators – These operators drive exclusively for a hiring trucking company and work under the latter’s authority. They may or may not own their
own trucking equipment (tractors and trailers) and do not have their own motor-carrier operating authority from the Department of Transportation.
They’ve operated as independent contractors because the lease agreements let them choose their own loads, but the agreements bar them from using their equipment to drive for other entities.
Effect: These operators will essentially be illegal.

Non-exclusive leased owner-operators – These contractors own their own equipment and have DOT motor-carrier operating authority. They move cargo primarily for a motor carrier with which they contracted but they can also work for other customers.
Effect: This group may or may not be affected depending on the arrangements they have with the motor carrier.

For-hire owner-operators – These operators own their own equipment, have their DOT motor-carrier authority and source loads through brokers or other means. They are their own bosses and they choose whom they will move freight for.
Effect: This subset is the least likely to be affected.