Business Groups See Pending Bills Eroding Interests
By HOWARD FINE
When the economy is in the doldrums, businesses typically look for government to extend a helping hand with tax breaks or other stimulus measures.
But this election year, with Democrats firmly in control in Sacramento and the state confronting a record $24 billion deficit, California businesses are seeing just the opposite from lawmakers: a host of measures that add mandates and restrict the flexibility of businesses to cut costs. They are among the hundreds of bills now on the desk of Gov. Gray Davis, awaiting his signature or veto by the end of the month.
Topping the list is a sweeping new program to give employees of all California companies the right to take six weeks of paid leave to take care of a sick family member or other pressing family matters.
Also on Davis’ desk are measures to require severance pay for many workers, limit the ability of businesses to get lawsuits filed against them dismissed quickly, and mandate state regulators to establish an ergonomics regulation for all companies within two years.
It’s impossible to calculate in advance the cost of a lawsuit not filed or the impact of extended sick leaves. But taken together, these bills either will add costs to the bottom lines of businesses or restrict the ability of companies to cut costs.
While few, if any, businesses are likely to go under as a direct result, some may find it harder to grow their operations, especially in a sluggish economy.
“Rather than making it easier to do business, which is what one would hope for in times like these, an awful lot of legislative energy was spent on making it harder to do business in California,” said Dorothy Rothrock, vice president of government relations for the California Manufacturers & Technology Association.
The CMTA, the California Chamber of Commerce, the National Federation of Independent Business and other business groups around the state are urging Davis to veto these bills, as he has similar bills in past years.
Davis likely to sign
But this election year may be different. Davis has sought to shore up strained relations with his labor base as he prepares to face down Republican challenger Bill Simon.
“We think Davis is going to sign most of these bills,” said Martyn Hopper, California state director of the National Federation of Independent Business. “To put it politely, he’s forsaken his moderate base. It’s now election-year politics, pure and simple.”
Davis has already signed one measure to emerge in the final days of the legislative session: a bill allowing local governments to enforce local employment rules, like the coastal zone living wage measure now being considered in Santa Monica.
And earlier this year, the governor signed a bill with an even bigger impact on employers: an increase in workers’ compensation benefits totaling a projected $2.5 billion, starting next Jan. 1.
For employers, the only solace is that it could have been worse.
More than a dozen bills labeled “job killers” by the California Chamber were stopped in the final, frenzied hours of the session on Aug. 31, thanks to a block of moderate Democrats, mostly from the Central Valley. Among them: a bill linking the state’s minimum wage to increases in the Consumer Price Index, a measure prohibiting arbitration clauses in health care plan contracts, and two bills limiting confidential settlements to lawsuits.
Also, the much-publicized privacy bill died in the final hours; it would have required customers of financial institutions to “opt in” before those institutions could share information on their customers with other companies. Banks and other financial institutions lobbied heavily against the bill, stopping it as they had in each of the two previous legislative sessions.
In addition, much of the legislation making it to Davis’ desk was watered down. The paid leave bill, for example, started out as a 12-week leave, with half the cost paid by employers and half by employees. The bill on Davis’ desk has the entire cost borne by employees through the State Disability Insurance fund and the paid leave is now limited to six weeks.
“We were not happy to make the compromise, but the votes simply weren’t there for the original bill,” said Tom Rankin, president of the California Labor Federation. “Now that the compromise has been made, I don’t see how Davis can possibly veto it.”
Rankin said it’s essential that employees have the ability to take paid leave. “In our surveys, 78 percent of employees questioned said they needed to take extended leave to deal with sick children or parents but couldn’t afford to go all those weeks without pay, so they didn’t take the leave,” he said.
Nonetheless, business groups are urging a Davis veto on paid leave, arguing that it will mean more extended absences from work, which would be especially burdensome on small employers.
“If you have 10 employees, and one of them takes a paid leave for six weeks, you suddenly lose 10 percent of your workforce and have to scramble to make that up,” said Fred Main, senior vice president of the California Chamber of Commerce.
Employers are also concerned about the ability of the SDI fund to handle all additional claims. If the fund shows any sign of strain, they fear that legislators will seek a levy on employers to prevent insolvency. But Rankin dismissed such fears, saying there will be 18 months to build up employee contributions to the fund before the new program kicks in.
While the paid leave bill dominated the headlines, employers may have to grapple with the impact of several other measures.
One is a sweeping bill requiring the imposition in two years of a statewide ergonomics standard to reduce the risk of repetitive stress injuries. Employers beat back an ergonomics standard back in 1994, claiming there was little scientific evidence that redesigning workstations would reduce such injuries.
Another measure would restrict the ability of employers to have binding arbitration clauses in employment contracts. Yet another set of bills would govern employer actions in layoffs: one requiring 60 days notice of termination instead of the current 30 days for companies with more than 75 employees; the other requiring severance pay for all hourly workers if top-level salaried workers also get severance packages.
Only a few bills sought by business actually made it through. Perhaps the biggest was a measure to rein in construction defect lawsuits now plaguing the condo and townhome industry. The bill tightens the definition of what can be considered a construction defect.
And one piece of legislation backed by the L.A. Area Chamber of Commerce did not make the cut. In an attempt to curb runaway film and television production, this would have provided tax credits for production companies that filmed in California. The bill died in committee earlier last month.