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New Laws for 2005

It’s gotten to be a familiar refrain every Jan. 1: Employers hit with a slew of costly laws, from minimum wage hikes to paid family leave.


This year is notable for what won’t happen. Only a few new laws are in the offing, thanks to the veto pen of Gov. Arnold Schwarzenegger.


Citing the potential impact on California’s business climate, the governor vetoed legislation involving a minimum wage hike, restrictions on outsourcing and tougher penalties for gender-based pay discrimination. He also campaigned against Proposition 72, a referendum that would have required many businesses to provide health care for their workers.


“It’s nice to have an employer-friendly administration for a change,” said Karen Anderson, vice president of membership and marketing for the Employers Group, a consulting firm.


Added Michael Shaw, assistant state director for the California chapter of the National Federation of Independent Business: “This year, there are many fewer new laws that business owners need to be concerned about.”


Perhaps the most publicized law taking effect Jan. 1 requires employers with 50 or more workers to provide two hours of sexual harassment training every two years. Business groups lobbied against the measure, saying it would impose additional costs and that similar training is already required under other statutes.


“This is a duplicative program,” said Gino de Caro, spokesman for the California Manufacturers and Technology Association. “Supervisors and managers must already undergo six hours of human resources-related training each year.”


Nonetheless, Schwarzenegger, who was dogged by allegations of sexual harassment during the recall election, signed the bill.


The California Chamber of Commerce says it has received some calls from employers confused about whether temporary workers, part-time workers and independent contractors are included in the 50-employee threshold. (The answer is unclear; regulations are still being formulated.)


Workers’ comp tradeoff


The most sweeping changes for employers will involve workers’ compensation. Schwarzenegger used the threat of an initiative to push through a major reform package last April. Since then, there have been only minor cuts in workers’ comp premiums, although many of the law’s provisions don’t kick in until Jan. 1.


New features such as permanent disability benefit ratings and the establishment of medical provider networks are expected to push down rates significantly over the next year.


In exchange, though, employers will be required to pay for “immediate medical treatment” of up to $10,000 for any workplace injury, regardless of whether the workers’ compensation claim is ultimately accepted or denied.


Also on the health care front: a new law that requires health plans to provide the same level of coverage for domestic partners as for spouses.


Employers did avoid what would have been an added expense when voters last month rejected Proposition 72, the referendum on a 2003 law requiring employers with more than 50 employees to either provide health care coverage for their workers or pay into a state-operated fund that would cover the uninsured. Had the referendum passed, the law would have hit large employers starting Jan. 1, 2006.


Businesses will be facing several changes on the unemployment insurance front. On Jan. 1, the last of five consecutive planned increases in benefits for unemployed workers goes into effect. That will put more pressure on the employer-funded unemployment insurance trust fund that narrowly averted insolvency this year.


Meanwhile, AB 664, by then-Assemblyman (now Sen.) Alan Lowenthal, D-Long Beach, will dramatically increase penalties for employers who under-report their payrolls to lower their unemployment tax liability.


Another paperwork drag: A new law requires employers to list only the last four digits of employees’ Social Security numbers on all payroll-related information, to protect workers’ privacy and prevent identity theft.

Businesses must comply with the four-digit system by Jan. 1, 2008 but can start switching over on Jan. 1.


Allowing employers time


Finally, employers must take steps to comply with changes to a law, although those changes were designed to ultimately ease a burden on them.


This year, an earlier law expanding the right of employees to sue their bosses for workplace violations was gutted. Beginning Jan. 1, an employee must exhaust internal administrative remedies before filing a lawsuit against his or her employer. The employers must provide the administrative framework for this process.


The revised law also allows employers time to fix some alleged violations of labor codes before any further action, such as filing a lawsuit, can be taken.

In the coming year, Democrat lawmakers may send more bills targeting business to Schwarzenegger’s desk. But with the governor’s willingness to wield his veto pen, it’s not likely that employers will be swamped by a wave of new laws come Jan. 1, 2006. In fact, the push will be on to pass business-friendly legislation.


“We have succeeded in not making the business climate any worse,” said de Caro. “Now we’re going to concentrate on making it better.”

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.
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