Our Partners in Advocacy
The California Chamber is the largest business advocate working at the state and federal level in California. The Roseville Area Chamber’s advocacy team often partners with the CalChamber to send letters to state agencies and legislators and to testify at legislative hearings. The Roseville Area Chamber of Commerce participates in weekly conference calls with the CalChamber to hear about updates in legislation and to focus on statewide policy.
The CalChamber works on a wide range of policy to shape proposed laws and to work on passing or killing legislation. They release an annual job killer bills list and a job creator bills list, giving a streamlined look into crucial legislation.
Below are letters the Roseville Area Chamber of Commerce has signed with CalChamber.
April 4, 2023
TO: Members, Senate Judiciary Committee
SUBJECT: SB 809 (SMALLWOOD-CUEVAS) CALIFORNIA FAIR EMPLOYMENT HOUSING ACT:
FAIR CHANCE ACT OF 2023: CONVICTION HISTORY
OPPOSE/JOB KILLER – AS INTRODUCED FEBRUARY 17, 2023
The California Chamber of Commerce and the organizations listed below are OPPOSED to SB 809
(Smallwood-Cuevas) which has been labeled a JOB KILLER. SB 809 undermines the years of
negotiations that culminated in the existing California Fair Chance Act, which struck a careful balance
between removing barriers to the workforce and the need to consider conviction history for certain job
positions. SB 809 would eliminate employers’ ability to consider conviction history unless they meet one of the narrow exceptions, even if that conviction history is voluntarily disclosed to them or widely publicized. Further, provisions causing delays in hiring and excessive penalties would exacerbate the rising costs of doing business in California and further impact affordability. While we appreciate the intent behind SB 809, the potential unintended consequences will have a significant impact on employees and customers.
SB 809 Dismantles Negotiations on AB 1008 (2017) – The California Fair Chance Act
California employers are anxious to hire qualified and willing residents, including job applicants exiting the justice system. In 2017, California enacted AB 1008 (McCarty)- the California Fair Chance Act. AB 1008 was the result of years long discussions between various stakeholders and legislators regarding the use of conviction history in employment decisions.
The California Fair Chance Act prohibits employers from inquiring about or relying on a job applicant’s conviction history in making a hiring determination until a conditional offer is made. Legislators led stakeholders in extensive negotiations regarding AB 1008 to ensure the law struck a careful balance between workplace safety and providing applicants who have a conviction history with a fair opportunity to participate in the workforce.
Just five years after AB 1008’s effective date, SB 809 repeals the California Fair Chance Act in its entirety. SB 809 would replace this carefully negotiated law with an untenable framework under which no employer may ever inquire about or rely on conviction history unless an existing law explicitly permits them to do so.
SB 809’s Unintended Consequences Negatively Impact the Workplace and Customers
While we agree with the importance of ensuring that applicants with a conviction history are provided with fair access to the job market, the potential unintended consequences of SB 809 are significant. The exceptions are extremely limited and tend to only cover heavily regulated industries (such as banking or healthcare) or jobs the government has perceived to be sensitive in nature (schools or security guards). But SB 809’s flaw is that many of the same rationales that served as the impetus for laws directing certain industries to conduct background checks, such as interacting with children or access to consumer financial information, apply to businesses not covered by those laws. For example, youth sports/organizations operated through a park & recreation league or school district qualify for an exception, but private youth sports organizations do not.
Under SB 809, companies would be prohibited from considering conviction history in the following scenarios:
Home delivery: there are many industries in which deliveries are made directly to a customer’s home address such as food delivery, furniture delivery, and more. Not only do delivery personnel have access to the customer’s personal address, but in some circumstances, they are entering customers’ homes or receiving payment from the customer at their home, leaving the customer in a vulnerable position.
Access to sensitive personal information: as technology improves and more transactions take place online or in software platforms, there are many positions in which employees have access to sensitive personal information. This is not limited to regulated industries like banks. For example, IT personnel often have access to a large breadth of private data within a company. An IT employee or contractor dealing with consumer-facing software will inevitably have access to consumer information in carrying out their duties and will also have access to sensitive company information that could be easily misappropriated. Consumers are relying on companies offering these services to keep their data secure and private. SB 809 is at odds with California’s strict laws related to data privacy because it removes a company’s ability to reject an applicant or employee who may pose a risk to that privacy.
Vulnerable populations: employers that manage accommodations open to the public often have employees who regularly interact with vulnerable populations, such as children or the elderly. It is critical for an employer to know if an employee has committed acts in the past against children or the elderly or has any tendencies towards violence.
Hospitality: Employees in the hospitality industry regularly interact with customers, sometimes on a one-on-one basis. Consider a hotel, where employees have keys to rooms and may be regularly entering a guest’s room for food service or maintenance. Hotels would not be permitted to consider conviction history under SB 809.
Certain Convictions Are Relevant to Every Workplace
It is every employer’s goal to create a safe working environment for their workers and customers. Prohibiting an employer from becoming aware of or reacting to convictions for violent crimes, sex offenses, theft, or other serious crimes can undermine that goal. Not only does SB 809 prohibit most employers from conducting a background check, but proposed Government Code section 12954.2.02 also prohibits an employer from considering conviction history even if voluntarily disclosed to the employer, publicly available online, or otherwise made known to the employer. This puts an employer in an impossible position of knowing that an applicant or existing employee up for promotion has in fact committed a violent crime and not being able to consider it at all, potentially putting both fellow employees and customers at risk. Further, proposed sections 12954.2.02(a)(4)(A), 12954.2.04, and 12954.2.05 provide that an employer could not terminate an existing employee or contractor upon learning that they committed a violent crime or other serious offense that could undermine workplace safety. While we agree that one prior act is not conclusive that a person would commit a second offense, these are important considerations employer should be able to evaluate in light of the nature of the position.
Last year, this Legislature passed SB 731 (Durazo), which expanded automatic review and granting of record relief to felony arrest records and additional convictions. Due to similar concerns that were raised, an amendment was added excluding serious, violent, and sex felonies from automatic relief. Similar considerations must be given here, especially considering that an incident at the workplace could be preventable if the employer was allowed to know or react to a person’s past tendency towards serious or violent crime. This is why the existing California Fair Chance Act strikes the correct balance in our view: it allows employers to become aware of these prior offenses but puts guardrails on when they are permitted to know and when they can use such an offense as a reason to deny employment.
Proposed Section 12954.2.02(a)(10) Makes Compliance Impossible
For employers who are permitted to run background checks pursuant to 12954.2.02(b), section 12954.2.02(a)(10) provides that they cannot take an adverse action against someone on the basis of delay in obtaining or failure to obtain information regarding the person’s conviction history. An adverse action could include not hiring someone or denying a promotion.
This is impossible to comply with because delays or failures to complete background checks are out of an employer’s control. This is true now more than ever in light of the background check delays caused by All of Us or None of Us- Riverside Chapter v. Hamrick, 64 Cal. App. 5th 751 (2021). That case prohibited searching records by drivers’ license numbers or date of birth, which are necessary to filter records between people with the same name. It has become nearly impossible in certain counties to decipher which records pertain to the applicant and which pertain to a different person with the same name.1 Employers are experiencing delays of up to 8-12 weeks in hiring, with some background checks being returned as incomplete. Proposed section 12954.2.02(a)(10) essentially says that if there is a delay or the background check cannot be completed, that cannot be a basis on which to reject an applicant or promotion. Not only are these delays or incomplete checks out of the employer’s control, but this means that employers covered by the exceptions in subsection (b) would be required to disobey whichever statute or law is placing a
1 According to the 2010 Census Data, over 14 million people in the United States share the top ten most common last names.
restriction on who can be hired for a specific position. This section is therefore impossible to comply with and forces employers to violate other laws.
Proposed Section 12954.2.02 Will Cause Unnecessary Hiring Delays
Under current law, employers who are required to conduct background checks or to restrict employment based on criminal history need not wait until after a conditional offer to consider conviction history. This makes sense because if a law clearly states that someone who has been convicted of fraud may not work in a certain position, then the employer and applicant should know as soon as possible whether a prior conviction is disqualifying. Proposed Section 12954.2.02 instead would require the applicant to continue through the entire interview process just to discover that they are legally not allowed to hold that position. This will lead to delays in hiring and is not beneficial to the applicant seeking the job.
Several Provisions of the Individualized Assessment Portion of the Bill Are Not Feasible
Requiring all individualized assessments to be in writing: Under the existing California Fair Chance Act, the employer may, but is not required to, explain its reasoning for denying an applicant in writing. That portion of the statute was the result of stakeholder and legislator concerns regarding liability. SB 809 would require an explanation in writing, which could be used in litigation or enforcement actions. This is problematic, especially for smaller businesses with no legal counsel whose written statements will be picked apart by counsel in court.
Presumption: Proposed section 12954.2.03(c)(1) provides that if the applicant is not currently incarcerated or has completed a sentence for the conviction, there is a presumption that there is no direct and adverse relationship between the applicant’s conviction and the applicant does not pose a risk to public safety. It is likely that this presumption would apply to most applicants. Therefore, this presumption effectively makes it impossible for an employer to disqualify an applicant for a position. This provision essentially renders the portion of the bill allowing for an individualized assessment meaningless. And as discussed above, someone with a conviction of a violent crime would be considered not to pose a risk to public safety under this provision.
Excusing failure to provide documentation: Proposed section 12954.2.03(e)(3) provides that if the applicant fails to provide any documentation or information in response to the preliminary decision, the employer cannot use that as a basis to disqualify the applicant from employment or promotion. In effect, this means that the applicant can dispute the decision with no supporting evidence and the employer must acquiesce. While in some circumstances we understand it may be difficult to obtain documentation, to excuse providing documentation in every instance means an employer has no ability to question the validity of the applicant’s response.
SB 809’s Penalty Structure is Unnecessarily Punitive
SB 809 provides for civil penalties for “each violation” of the proposed statute. The proposed statute is a myriad of complex requirements where it is easy for any employer to accidently misstep. To levy a penalty for every possible small violation could expose an employer to tens of thousands of dollars in penalties. Further, it is unclear whether a “second” violation penalty is triggered by two mistakes regarding the same applicant or a second applicant. The former would exacerbate liability quickly, resulting in exceptionally high penalties.
Further, proposed section 12954.2.09’s structure regarding when payments are due, the bond process, and judgments is overly prescriptive with infeasible timelines. A violation of one of those short timelines could result in the employer owing their assessed liability plus the cost of the required bond. This includes situations where they parties have entered into a settlement agreement, which often provide far more than ten days to issue payment due to the time it may take a company’s financial department to process and issue the required amounts.
For these and other reasons, we respectfully OPPOSE SB 809 as a JOB KILLER.
April 4, 2023
TO: Members, Senate Judiciary Committee
SUBJECT: SB 365 (WIENER) CIVIL PROCEDURE: ARBITRATION
OPPOSE/JOB KILLER – AS INTRODUCED FEBRUARY 8, 2023
The California Chamber of Commerce and the organizations listed below respectfully OPPOSE SB 365 (Wiener) which has been labeled as a JOB KILLER. It is clear that the true motive behind SB 365 is an attempt to eliminate the use of arbitration agreements altogether. SB 365 incorrectly assumes that all appeals related to arbitration are meritless. It also undermines the judicial principles embodied in Code of Civil Procedure section 916 and eliminates a trial court’s inherent right to stay its own proceedings. The motive behind SB 365 to deter arbitration and single out arbitration from other types of proceedings will result in a finding that it is preempted by the Federal Arbitration Act (FAA) as the Ninth Circuit recently did by striking down another attempt at limiting arbitration – AB 51 (Gonzalez) from 2019. SB 365 will only lead to additional litigation and more money in the pockets of trial attorneys, which will increase the cost of doing business in California and exacerbate the ongoing affordability crisis we are facing.
SB 365 Will Increase Litigation to the Detriment of Consumers, Employees, and Companies
The motive behind SB 365 and its likely result is to increase civil litigation. The stakeholder that generally profits from civil litigation is the attorney, not the consumer or worker.1 For example, consumers and employees typically receive higher awards and have their claims resolved more quickly in arbitration than litigation.2 The same holds true when one looks at data from California’s own agencies regarding outcomes in litigation versus agency enforcement. In the case of the Private Attorneys General Act (PAGA), the current average payment that a worker receives from a PAGA case filed in court is $1,300, compared to $5,700 for cases adjudicated by the state’s enforcement agency. Attorneys on average recover a minimum of 33% of the workers’ total recovery, or $372,000 on average in litigation. In addition to receiving lower average recoveries in PAGA cases, workers also wait almost twice as long for their owed wages. Resolving disputes outside of litigation is better for all parties and ensures the consumer and worker are made whole more quickly rather than increasing fees and payments for trial attorneys.
SB 365 is Based on the False Assumption that All Appeals are Frivolous
SB 365 erroneously assumes that every single appeal of a denial to compel arbitration is meritless. According to the author the stated motive behind SB 365 is to “reign in” arbitration by allowing all trial court proceedings to continue during an appeal of “obviously invalid or inapplicable forced arbitration clauses”.3 In reality, SB 365 is not so limited. It does not simply apply to situations where there has been a determination that an appeal is frivolous or the arbitration clause is “obviously invalid”. Rather, it applies to every single appeal of a ruling denying a motion to compel arbitration.
To enact SB 365 is to assume that no trial court is ever wrong, which is simply untrue. Indeed, in a case currently pending before the United States Supreme Court on the very issue of whether proceedings should be stayed during appeal, both district courts that made the rulings at issue specifically acknowledged that they may be overturned on appeal. One stated “reasonable minds may differ” over the denial on the motion to compel arbitration and the other stated “I could see a different legal set of minds looking at this factual pattern and saying I was wrong” and that it was “really hesitating” because “if I’m wrong, then you’ll go forward in arbitration, but the parties will have spent a lot of time and money dealing with things that you would not have otherwise had to deal with if I’m wrong.”4 To appeal decisions like these is certainly not meritless. It does not make sense that SB 365’s complete ban on staying proceedings should apply in situations like these.
SB 365 Undermines the Intent of Code of Civil Procedure Section 916 and Divests Trial Courts of the Power to Grant Discretionary Stays
Under California Code of Civil Procedure section 916, if an appeal is filed it stays the trial court proceedings for all matters related to the appeal. To determine if section 916 applies, the court looks not only at whether the appeal would be rendered moot if trial court proceedings moved forward, but also whether continuing trial court proceedings would be “irreconcilable” with the appeal outcome. An example of this is where “the very purpose of the appeal is to avoid the need for the proceeding”. Varian Medical Systems, Inc. v. Delfino, 35 Cal. 4th 180, 190 (2005) (emphasis added). The purpose of section 916 “is to protect the appellate court's jurisdiction by preserving the status quo until the appeal is decided. The [automatic stay] prevents the trial court from rendering an appeal futile by altering the appealed judgment or order by conducting other proceedings that may affect it.” Id. at 189 (cleaned up) (emphasis added). In essence, trial proceedings should be stayed if the result on appeal may void the need to have the trial altogether. A stay
1 Coalition Letter on a Hearing Related to Arbitration in Financial Service Products | U.S. Chamber of Commerce (uschamber.com); Why the CFPB’s Anti-Arbitration Bias Is Bad for Consumers | U.S. Chamber of Commerce (uschamber.com)
2 FINAL-ndp-Consumer-and-Employment-Arbitration-Paper-2022.pdf (instituteforlegalreform.com)
3 Senator Wiener Introduces Legislation To Stop Corporate Arbitration Abuse | Senator Scott Wiener (ca.gov)
4 Joint Petition for a Writ of Certiorari in Coinbase, Inc. v. Bielski, available at: https://www.supremecourt.gov/DocketPDF/22/22-105/232231/20220729160525276_Coinbase%20Joint%20Cert%20Petition%207-29-22%20Final.pdf
under section 916 should be granted even if the trial court judge believes the appeal will fail. See Daly v. San Bernadino County Board of Supervisors, 11 Cal. 5th 1030, 1051 (2021).
Courts have repeatedly held that an appeal from a denial of a motion to compel arbitration falls squarely within the exact issue that section 916 was enacted to address: that allowing trial to move forward would be irreconcilable with an outcome on appeal if the trial court is reversed. Id. at 190; Prudential-Bache Securities, Inc. v. Superior Court, 201 Cal. App. 3d 925 (1988). If the appeal is successful, the parties and court will have wasted tremendous costs and resources on a proceeding that should never have happened in the first place. SB 365 discriminates against arbitration by saying that section 916 should never apply with regard to appeals related to a motion to compel.
It should also be noted that SB 365 goes one step further in its undermining of existing procedure. Not only does it remove arbitration from the purview of section 916, it also eliminates the trial court’s discretion to stay proceedings. Presently, trial courts have the inherent power to grant a discretionary stay if it serves the interests of justice and judicial efficiency. See OTO, LLC v. Kho, 8 Cal. 5th 111, 141 (“the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants”) (internal citations omitted). SB 365 completely divests the trial court of this power when it comes to arbitration.
SB 365 is Likely Preempted by the Federal Arbitration Act (FAA):
The United States Supreme Court has consistently and unequivocally declared a national policy favoring arbitration of claims. As the Ninth Circuit recently noted when striking down yet another California arbitration law:
The Court has “repeatedly described the Act as ‘embod[ying] [a] national policy favoring arbitration,’ and ‘a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.’” Id. at 346, 131 S.Ct. 1740 (citations omitted). In enacting the FAA, Congress intended to combat the longstanding “hostility towards arbitration” that “had manifested itself in a great variety of devices and formulas declaring arbitration against public policy.” Id. at 342, 131 S.Ct. 1740 (citation and quotation marks omitted). We have gone further, stating that “the FAA's purpose is to give preference (instead of mere equality) to arbitration provisions.” Mortensen v. Bresnan Commc'ns, LLC, 722 F.3d 1151, 1160 (9th Cir. 2013).
Chamber of Commerce of the United States of America v. Bonta, 2023 WL 2013326 at *6 (9th Cir. 2023) (holding AB 51 (Gonzalez) (2019) is preempted by the FAA).
Based on the purpose of the FAA, the Supreme Court has established an “equal-treatment principle”, which requires arbitration agreements to be on equal footing with all other contracts. Id. A state law will be struck down if it discriminates against arbitration on its face, has a disproportionate impact on arbitration agreements, stands as an obstacle to the objectives of the FAA, or disfavors arbitration agreements. Id. at *6-*7; AT&T v. Concepcion, 563 U.S. 333, 352 (2011). Courts have consistently invalidated California laws relating to arbitration as preempted by the FAA for these reasons and many others have been vetoed. See Chamber of Commerce, 2023 WL 2013326 at *2-*3 (citing examples).
By requiring litigation to continue in every case during the appeal of a denial of a motion to compel, SB 365 undercuts the benefits of arbitration in providing a speedier, less costly forum in which to resolve disputes. Similar to the Ninth Circuit’s analysis of AB 51, it is clear that the intent behind SB 365 and its impact of forcing litigation in every case where an appeal is pending is to have a deterrent effect on a company’s willingness to enter into arbitration agreements.5 That is “antithetical” to the “liberal federal policy favoring
5 See Press Release on introduction of SB 365: “Forced arbitration clauses have become a common feature of consumer transactions and employment relationships. More than half of America’s workforce has been bound by arbitration agreements.” Id. at *10 (citations omitted). A state law “evincing hostility toward arbitration” is in
direct conflict with the equal-treatment principle. Id. (citations omitted).
Further, SB 365 “singles out arbitration provisions as an exception” to the law. It does so by removing
appeals related to the denial of a motion to compel arbitration from the purview of Code of Civil Procedure
Section 916 as well as eliminating a trial court’s inherent power to grant a discretionary stay in that
circumstance only. Id. at *10. SB 365 is clearly preempted by the FAA.
If Enacted, SB 365 Would Be a Significant Departure from Federal Procedure
The United States Supreme Court is set to rule this year in Coinbase, Inc. v. Bielski. The issue in Coinbase
is for the Court to settle a circuit split regarding whether an appeal of a denial of a motion to compel
arbitration ousts a district court’s jurisdiction to proceed with litigation pending appeal. Most circuits have
said “yes,” requiring district court proceedings to be stayed while the appeal is pending. Other circuits,
including the Ninth Circuit, have held that the district court has discretion over whether to stay the
proceedings pending appeal.
With either outcome, SB 365 would represent a significant departure from federal procedure on this issue.
SB 365 prohibits any stay whatsoever, even if the trial court thinks it prudent, while federally either the
district court would be mandated to stay proceedings or would at least have the discretion to do so. Further,
if SB 365 is enacted, many parties may choose to have FAA procedure apply to their arbitration agreements
and therefore instead follow the result reached in Coinbase. The California Supreme Court has held that
parties to an arbitration agreement can contract to require that FAA procedure apply. See Cronus
Investments, Inc. v. Concierge Services, 35 Cal. 4th 376 (2005).
For these reasons and more, we are OPPOSED to your SB 365 as a JOB KILLER.
California Chamber of Commerce
March 1, 2023
TO: Members, Senate Labor, Public Employment & Retirement Committee
SUBJECT: SB 592 (NEWMAN) LABOR STANDARDS INFORMATION AND ENFORCEMENT
SUPPORT/SPONSOR/JOB CREATOR – AS INTRODUCED FEBRUARY 15, 2023
The California Chamber of Commerce, California Hispanic Chamber of Commerce, and CalAsian Chamber of Commerce are pleased to SUPPORT SB 592 (Newman), which has been labeled a JOB CREATOR. SB 592 will bolster labor law compliance by requiring the Department of Industrial Relations (DIR) to translate its website, in its entirety, into the languages most spoken by Californians. Further, it will prevent any employer who relies in good faith upon the written advice of the Division of Labor Standards Enforcement (DLSE) regarding how to comply with the law from being punished through the assessment of civil and criminal penalties, fines, and interest.
The DLSE is a state agency that is charged with enforcing the wage, hour and working condition labor laws. As a part of its effort to fulfill this responsibility, the DLSE issues opinion letters on various wage, hour and working condition topics, Frequently Asked Questions (FAQs) regarding new labor laws, as well as an enforcement manual that sets forth the DLSE’s interpretation and position on these issues. This guidance was critical, for example, during the COVID-19 pandemic due to the number of new laws and ever-changing regulations. Currently, employers must refer to the DLSE’s written materials for “guidance” on these topics when there is no published, on-point case available. The DLSE can levy penalties against an employer for failing to do so if an employee files a wage claim.
The Catch-22 is that employers are provided with no certainty that they will be shielded from penalties if they comply in good faith with the DLSE’s written opinions or interpretations. There have been numerous instances where courts have veered in a different direction from established DLSE guidance, resulting in employers owing not only back wages, but also penalties under the Private Attorneys General Act (PAGA), Labor Code Sections 203, 226, and more. Examples include:
• Troester v. Starbucks, Cal.5th 829 (2018): The California Supreme Court rejected the de minimis doctrine for wage and hour claims, which is used in federal law, contrary to guidance included in the DLSE enforcement manual that employers must follow.
• Ward v. Tilly’s, Inc., 31 Cal.App.5th 1167 (2019): A California court of appeals required employer to pay out reporting time pay prior to employee physically reporting to work, contrary to prior guidance issued by the DLSE.
• Mendiola v. CPS Security Solutions, Inc., 60 Cal. 4th 833 (2015): The California Supreme Court holds employer liable for failure to pay “sleep time” during 24-hour shifts contrary to MOU entered into between DLSE and employer providing that employer’s policy was valid.
SB 592 eliminates this problem and provides businesses in California with the security to know that, if they seek out and follow written advice from the DLSE regarding how to comply with the law, they can actually rely upon that information. Specifically, SB 592 prevents an employer from being financially penalized through the assessment of statutory civil and criminal penalties, fines and interest if the employer relies in good faith on written advice from the DLSE and a court ultimately determines the DLSE’s advice was wrong.
Further, while employers are expected to follow this guidance and can be penalized by the DLSE for failing to do so, the guidance is essentially unusable for non-English speaking employers. While some materials are available in Spanish under a separate index page, the guidance materials are not translated into other common languages spoken in California such as Chinese, Tagalog, and Vietnamese.
Helps Small Businesses:
California has complex, burdensome labor and employment laws that are unique to the rest of the country. Small businesses that lack the financial resources to hire a human resources department or outside counsel to advise them on how to comply with these labor and employment laws only have the DLSE for guidance. SB 592 helps such small businesses by encouraging them to seek out and rely upon the advice they receive from the DLSE regarding how to comply with the law. During these difficult economic times, small businesses need certainty and SB 592 provides that certainty when state government provides advice.
Helps Non-English Speaking Employees and Employers:
While DIR must provide bilingual services, this has not included translation of their website. Because DIR’s website is only available in English, non-English speaking employers and workers are unable to utilize these resources at all. It is estimated that as many as 30% of immigrants in California speak little or no English and most speak another language at home. Even for those that do speak some English, it is difficult to utilize these resources due to the legal complexity of California’s labor laws. Employers may not know they are misinterpreting a law and employees cannot easily ensure that their rights are not being violated. By requiring DIR to translate its entire website into the four non-English languages most commonly spoken in California and protecting employers who rely on that guidance from penalties, SB 592 benefits both employers and employees.
Ensures Employees Receive Their Full Wages:
Although SB 592 prevents the assessment of any penalties, fines or interest against an employer who can prove their actions were based upon written guidance provided by the DLSE, it still requires the employer to pay all wages owed to an employee as well as any awarded attorneys fees or costs. In fact, SB 592 requires an employer who has asserted its good faith reliance on the DLSE as a defense to post a bond for the disputed amount of wages, thereby ensuring the employee is made whole.
Does Not Protect Bad Actors:
SB 592 requires the employer to prove that they are entitled to the good faith defense just as if it was asserting any other defense. This means that the burden of proof falls on the employer to demonstrate that it: (1) relied upon, and conformed to, the applicable opinion letter or enforcement policy published by the division; and (2) provided true and correct information to the division in seeking an opinion letter or enforcement policy, if applicable. The employer cannot succeed in asserting this defense if the facts and circumstances of the case did not align with the opinion letter or enforcement policy at issue. If the court is not satisfied with the employer’s evidence, it will reject the defense and assess penalties. A bad actor will not be able to satisfy these requirements. SB 592 solely protects the good actor who proactively seeks out guidance and conforms to it.
Notably, since 1947, the federal government has provided employers who rely in good faith upon the advice, opinion letters and guidance of the Department of Labor regarding the Fair Labor Standards Act with a complete defense against liability. See 29 U.S.C. Sections 258-259. This law, referenced as the Portal-to-Portal Act has been in existence for over 60 years. The California Fair Political Practices Commission as well as the California Rev & Tax Code regarding property taxpayers also contain good faith defenses.
Creates Certainty for Employers:
When the Portal-to-Portal Act was enacted, Congress set forth in its findings and declarations that “uncertainty on the part of industry,” as well as “the difficulties in the sound and orderly conduct of business and industry,” could negatively impact commerce. Accordingly, it included an affirmative defense for employers who rely upon the interpretations and opinions of the Wage and Hour Division of the Department of Labor.
Echoing the same concerns here, uncertainty for California employers regarding the correct application of California’s numerous labor and employment laws detrimentally impacts the state’s economy as well as employees. Providing certainty through SB 592 will assist all employers in their efforts to comply with the law, thereby producing a better business environment, growth in the economy, and an improved work environment for employees.
For these reasons, we are pleased to SUPPORT/SPONSOR SB 592 (Newman) as a JOB CREATOR.
California Chamber of Commerce
President and CEO
California Hispanic Chambers of Commerce
Pat Fong Kushida
President and CEO
Cal Asian Chamber of Commerce
cc: Legislative Affairs, Office of the Governor
Brandon Wong, Office of Senator Newman
Alma Perez, Senate Labor, Public Employment & Retirement Committee
Cory Botts, Senate Republican Caucus
March 14, 2023
The Honorable Roger Niello
California State Senate
1021 O Street, Suite 7110
Sacramento, CA 95814
SUBJECT: SB 703 (NIELLO) EMPLOYMENT: WORK HOURS: FLEXIBLE WORK SCHEDULES
SUPPORT/JOB CREATOR – AS INTRODUCED FEBRUARY 16, 2023
Dear Senator Niello:
The California Chamber of Commerce and the organizations listed below are pleased to SUPPORT your SB 703 as a JOB CREATOR. SB 703 will allow employee-selected flexible work schedules.
California is one of the only states that requires employers to pay daily overtime after eight hours of work in addition to weekly overtime after 40 hours of work. Even other states that impose daily overtime requirements allow the employer and employee to essentially waive the daily eight-hour overtime requirement through a written agreement. California, however, provides no such common-sense alternative. Rather, California requires employers to navigate through a multi-step process to have employees elect an alternative workweek schedule that, once adopted, must be “regularly” scheduled. This process is filled with potential traps that could lead to costly litigation, as one misstep may render the entire alternative workweek schedule invalid and leave the employer on the hook for claims of unpaid overtime wages.
Currently, there are 44,837 reported alternative workweek schedules with the Division of Labor Standards Enforcement. According to the Employment Development Department, California has about 1.6 million employers. Therefore, about less than 3% of California employers utilize the alternative workweek schedule option. Further, more realistically, given that the information in the database is according to work unit instead of employer, it is likely that less than 1% of employers in California are utilizing this process.
Employees want flexibility in their work schedules. In a recent poll conducted by the California Chamber of Commerce, 88% of voters agreed (49% of them strongly) that the state’s overtime laws should be changed to make it easier for employees to work alternative schedules, such as four 10-hour days. A survey by the Society for Human Resource Management revealed that 91% of Human Resources professionals agree that flexible work arrangements positively influence employee engagement, job satisfaction, and retention. According to Corporate Voices for Working Families and WFD Consulting, an in-depth study of five organizations that allow their non-exempt employees to have flexibility in their schedules found that employee commitment was 55% higher and burnout and stress decreased by 57%. Women and low-income workers have suffered the most from the inability to have flexible schedules, feeling pressured to abandon career goals to care for children and fulfill household obligations. That pressure has been exacerbated by the COVID-19 pandemic. An article by NPR estimated that close to 900,000 women left the workforce in 2020 to keep up with the demands of childcare and household obligations. That rate is four times higher than men.
As our economy recovers from the pandemic, we should be doing everything possible to maximize opportunities for employers. California should allow employees to set hours that work for an employees’ personal and family obligations rather than continuously trying to impose new mandates on employers, which burden their ability to afford to hire. This way, workers can continue to be employed and support themselves and their families.
SB 703 would provide employees more flexibility because the employee could request an alternative workweek schedule on an individualized basis. It would also relieve employers of the administrative cost and burden of adopting an alternative workweek schedule per division. Pursuant to SB 703, at the request of the employee, an employer would be able to implement a flexible work schedule that allows the employee to work up to ten hours in a day or 40 hours in a week, without the payment of overtime. Employers should be able to provide their employees more flexibility and negotiate through a written agreement, revocable by either party, a daily/weekly schedule that satisfies the needs of both the employee(s) and the employer.
Promoting flexible policies that allow employees to continue to be employed and earn income is needed now more than ever.
For these and other reasons, we are pleased to SUPPORT your SB 703 as a JOB CREATOR.
California Chamber of Commerce
Acclamation Insurance Management Services (AIMS)
Allied Managed Care (AMC)
Anaheim Chamber of Commerce
Building Owners and Managers Association
California Association of Health Facilities
California Association for Health Services at Home
California Beer and Beverage Distributors
California Building Industry Association
California Business Property Association
California Cattlemen’s Association
California Farm Bureau
California New Car Dealers Association
California Restaurant Association
California League of Food Producers
California Trucking Association
California Lodging Industry Association
Carlsbad Chamber of Commerce
Chino Valley Chamber of Commerce
Citrus Heights Chamber of Commerce
Coalition of Small and Disabled Veteran Businesses
Commercial Real Estate Development Association (NAIOP)
Danville Area Chamber of Commerce
Family Business Association of California
Flasher Barricade Association (FBA)
Fresno Chamber of Commerce
Gilroy Chamber of Commerce
Greater High Desert Chamber of Commerce
Greater San Fernando Valley Chamber of Commerce
Half Moon Bay Coastside Chamber of Commerce
Hollywood Chamber of Commerce
Independent Lodging Industry Association
Industry Business Council
La Cañada Flintridge Chamber of Commerce
Laguna Niguel Chamber of Commerce
Lake Elsinore Valley Chamber of Commerce
Los Angeles Area Chamber of Commerce
Mammoth Lakes Chamber of Commerce
Manteca Chamber of Commerce
Mariposa County Chamber of Commerce
Mission Viejo Chamber of Commerce
Murrieta Wildomar Chamber of Commerce
National Federation of Independent Business
Oceanside Chamber of Commerce
Official Police Garages Association of Los Angeles
Orange County Business Council
Pacific Grove Chamber of Commerce
Palos Verdes Peninsula Chamber of Commerce
Plumbing-Heating-Cooling Contractors Association of California (CAPHCC)
Rancho Cordova Area Chamber
April 6, 2022
The Honorable Evan Low California State Assembly 1021 O St., Ste. 6110
Sacramento, CA 95814
SUBJECT: AB 2932 (LOW) WORKWEEK: HOURS AND OVERTIME OPPOSE/JOB KILLER- AS AMENDED MARCH 24, 2022
Dear Assembly Member Low:
The California Chamber of Commerce respectfully OPPOSES AB 2932 (Low), which has been labeled as a JOB KILLER. AB 2932 imposes a tremendous cost on employers and includes provisions that are impossible to comply with, exposing businesses to litigation under PAGA. AB 2932’s impact on labor costs in California will discourage job growth in the state and likely reduce opportunities for workers.
AB 2932 Imposes Significant Costs on Employers by Reducing the Weekly Overtime Threshold to 32 Hours and Mandating that Employees’ Base Rate of Pay Be Increased:
The additional labor costs imposed by AB 2932 will be untenable for many businesses. Presently, California employees are entitled to overtime pay for any time worked after eight hours in a day or 40 hours in a week. Overtime is paid at 1.5 times the employee’s regular rate of pay. Significantly, that is not the base rate of pay. The regular rate of pay is a complex calculation that takes into account bonuses, commission, and other forms of compensation.
California is one of the only states with the eight hours per day requirement. The remaining states all comply with the federal Fair Labor Standards Act (FLSA), which only requires overtime after 40 hours in a week. Now, California is proposing to be the only state to differ from the FLSA in two ways: both the daily eight hour requirement and lowering the 40 hour weekly overtime threshold to 32 hours. That is a minimum 10% increase in wages per employee per week.
But- AB 2932 does not stop there. The language provides that “[t]he compensation rate of pay at 32 hours shall reflect the previous compensation rate of pay at 40 hours”. This language may be interpreted as requiring the employer to pay the employee the same total compensation that they are presently earning at 40 hours for 32 hours of work. By way of example, an employee making $20 per hour presently makes
$800 after 40 hours of work. Now, they would be required to make $800 after just 32 hours of work, meaning their hourly rate would become $25 per hour, a 25% increase. If the employer needs the employee to work overtime, the regular rate of pay1, becomes $37.50 per hour. A business would be paying $37.50 for every hour worked on the fifth day, an 87.5% increase from $20 per hour.
This significant rise in labor costs will not be sustainable for many businesses. Labor costs are often one of the highest costs a business faces. Such a large increase in labor costs will reduce businesses’ ability to hire or create new positions and will therefore limit job growth in California. This is especially true now as businesses are still recovering from the impacts of COVID-19 and resulting rises in supply chain costs. The repeated assumption by the Legislature that businesses with more than 500 employees can absorb
1 This assumes there is no other form of compensation for this employee that needs to be factored into the regular rate of pay calculation.
these costs is deeply flawed. It does not take into account that businesses often operate on thin profit margins and that the number of employees you have does not dictate financial success.
It is also likely that an unintended consequence of AB 2932 will be a reduction in hours for workers. Many businesses have already scaled back their hours as a result of increased costs and labor shortages. This will force them to do so even more and will make them reluctant to offer workers 40 hours’ worth of work.
AB 2932’s Requirement that Employers Not Adjust an Employee’s Regular Rate of Pay is Impossible to Comply With:
AB 2932 provides that “an employer shall not reduce an employee’s regular rate of pay as a result of this reduced hourly workweek requirement.” This is impossible to comply with. The regular rate of pay is not the base rate of pay set by the employer. It is a complex calculation that, for many employees, fluctuates from pay period to pay period. To calculate the regular rate of pay, you must include a number of different kinds of compensation, such as hourly earnings, commissions, and non-discretionary bonuses. If an employee earns a bonus for work performed in the prior month or quarter, the employer has to retroactively adjust the employee’s regular rate of pay for those prior pay periods. The regular rate therefore fluctuates significantly depending on how much overtime an employee works and the performance or attendance bonuses or commissions they receive, much of which is dependent on the employee or general performance of the business in any given week, not factors solely under the employer’s control. That rate will inevitably be reduced in some pay periods compared to others. Employers would face steep penalties under the Private Attorneys General Act (PAGA) for a violation that they have no ability to correct.
Instead of Burdening Employers with More Costs, the Legislature Should Provide More Flexible Work Options that Benefit Employers and Employees:
Like many of the bills and regulations that have been introduced over the past year, AB 2932 again proposes that California’s employers subsidize costs in the name of workplace flexibility instead of considering alternative solutions that could benefit both employers and employees. Instead of imposing new costs on employers, the Legislature should reform California’s unnecessarily rigid wage and hour laws to allow employees flexibility in their weekly schedules that would better align with the modern workplace. Presently, California’s inflexible Labor Code, steep penalty system, and convoluted alternative workweek schedule process dissuade employers from allowing employees to have more flexibility during their workday. Added costs such as split shift premiums, daily overtime, meal and rest break premiums, and a broad expense reimbursement requirement make workplace flexibility too expensive for employers to consider. Many employers are hesitant to continue to offer telecommuting after the pandemic because these wage and hour laws were not designed with telecommuting employees in mind. Any failure to adhere to certain rules immediately triggers penalties and attorney’s fees under various Labor Code provisions, including PAGA.
Employees want flexibility, whether it be through a more flexible daily schedule, alternative workweek schedule, or the ability to continue to telecommute after the conclusion of the pandemic. Yet, bills that propose increased flexibility are often not even set for a hearing. Updating these laws to provide more opportunities for flexibility is an important issue that benefits both employees while not significantly raising costs on employers as proposed by AB 2932. This concept is very popular among California voters. In a recent survey conducted by the California Chamber of Commerce, 91% of polled voters agree (56% strongly) that the state’s labor laws should be changed to allow for more flexibility. As to specific changes:
- 88% support changing overtime requirements to allow individualized alternative workweek
- 82% support allowing employees to take rest periods at any time of their
- 80% support allowing employees to forgo their 30-minute meal period to go home
- 79% support allowing employees to split their shifts to accommodate personal
The Legislature should thoughtfully consider these alternative solutions to provide workers with flexibility instead of simply continuing to raise costs on employers.
For these and other reasons, we respectfully OPPOSE your AB 2932 as a Job Killer. Sincerely,
Ashley Hoffman Policy Advocate
California Chamber of Commerce
cc: Legislative Affairs, Office of the Governor AH:am
May 16, 2022
TO: Members, Senate Committee on Environmental Quality
SUBJECT: AB 1001 (C. GARCIA) – ENVIRONMENT: MITIGATION MEASURES FOR AIR QUALITY IMPACTS: ENVIRONMENTAL JUSTICE
HEARING SCHEDULED – JUNE 1, 2022
OPPOSE / JOB KILLER – AS AMENDED MARCH 22, 2022
The California Chamber of Commerce, the California Building Industry Association and the organizations listed respectfully OPPOSE AB 1001, as amended, which CalChamber has labeled a Job Killer and CBIA has marked a Housing Killer. The bill proposes to expand the California Environmental Quality Act (CEQA) to further exacerbate known problems with the statute by limiting local land use discretion and imposing burdensome and unworkable new legal obligations on lead agencies. In attempting to address environmental justice concerns through CEQA as the bill proposes, AB 1001 winds up substantially aggravating one of the state’s most intractable problems: California’s housing crisis inextricably linked to its inability to produce housing quickly and cost effectively. The historical environmental injustices that have
transpired in California should continue to be remedied in more suitable areas of California law– but CEQA is not one of those areas.
CEQA already prohibits lead agencies from approving projects with significant environmental effects to any community, including disadvantaged communities, if there are feasible alternatives or mitigation measures that would substantially lessen or avoid those effects. AB 1001 will worsen CEQA’s most problematic aspects and further depress housing and other development in California by expanding the statute to create new avenues of CEQA litigation and limit agency discretion necessary to comply with CEQA. It is entirely unnecessary to upend CEQA when every single city and county in California is already going through the process of overhauling their long-term comprehensive General Plans to incorporate a new Environmental Justice land use element, as required per SB 1000 (Leyva). For the reasons outlined below, we oppose expanding CEQA and limiting agency discretion necessary to comply.
Exacerbates Known CEQA Abuses by Injecting Highly Subjective, Non-quantifiable and Litigation- bait Standards in CEQA
AB 1001 seeks to expand CEQA to incorporate the issue of discriminatory land use policies. Specifically, the bill creates two new legal standards under CEQA. First, it forces all public agencies when complying with CEQA to “act consistently with the principles of environmental justice … by ensuring the fair treatment and meaningful involvement of people of all races, cultures, incomes, and national origins.” Second, it creates a new requirement under CEQA that all mitigation pertaining to air quality impacts be directly mitigated in the affected disadvantaged communities. Both requirements present substantial ambiguities, legal challenges and additional liability for lead agencies and project applicants without any additional environmental protections.
Local governments already spend significant time and resources complying with CEQA, and then substantially more time and resources having to defend their decisions against CEQA lawsuits often brought by housing opponents under the guise of environmental protection. AB 1001 overlays over CEQA’s existing and quantifiable environmental standards new subjective standards, such as whether the agency’s findings were “fair” or “meaningfully involving” all races, cultures, incomes and national origins. CEQA already is the most robust public disclosure, public participation and environmental protection law in the country, if not the world – and it is enforced entirely by citizen lawsuits where the identity of the plaintiff can be legally obscured. Until major CEQA reform is passed that addresses NIMBY abuses of the statute, it is paramount that the Legislature avoid creating new avenues of litigation under CEQA.
CEQA Already Requires Feasible Mitigation of Significant Impacts on Disadvantaged Communities
CEQA is an extraordinarily complex and all-encompassing environmental law. CEQA and its multitude of substantive and procedural requirements are implicated for nearly every type of land use project in the State of California. CEQA’s “substantive mandates” already prohibit lead agencies from approving projects with significant environmental effects if there are feasible alternatives or mitigation measures that would substantially lessen or avoid those effects. (Mountain Lion Foundation v. Fish and Game Commission (1997) 16 Cal.4th 105, 134.) Furthermore, as part of CEQA’s enforcement process, “[i]n order to ensure that the mitigation measures and project revisions identified in the EIR or negative declaration are implemented,” the local agency must also adopt a program for mitigation monitoring or reporting. (CEQA Guidelines, § 15097, subd. (a).) “The purpose of these [monitoring and reporting] requirements is to ensure that feasible mitigation measures will actually be implemented as a condition of development, and not merely adopted and then neglected or disregarded.” (Federation of Hillside and Canyon Assns. v. City of Los Angeles (2000) 83 Cal.App.4th 1252, 1261.)
Additionally, where a local lead agency has determined that a project may cause significant impacts to a particular community or sensitive subgroup, the alternative and mitigation analyses must address ways to reduce or eliminate the project’s impacts to that community or subgroup. (See CEQA Guidelines, § 15041, subd. (a) [noting need for “nexus” between required changes and project’s impacts].) By requiring a nexus, CEQA already requires local lead agencies to feasibly mitigate significant impacts from a proposed project on all communities including disadvantaged communities where there is a nexus between the project’s
impacts and that population. By specifying disadvantaged communities, the measure implies that other affected people or resources are not deserving of protection. However, CEQA currently requires consideration of effects on all human beings. (See, Public Resources Code section 21083(b)(3)). Most importantly, the bill incorrectly focuses attention on mitigation in certain areas of effect rather than at the source of the pollution. Mitigation at the source protects all people and resources and allows the use of project design features which are under the control of the applicant and the lead agency. For example, AB 1001 could require an infill project in San Francisco to mitigate air emissions in a disadvantaged community in the south-central valley (wind patterns typically blow air pollutants from the Bay Area into the central valley) instead of at the source of where the emissions are generated. This is both impractical and contrary to existing CEQA provisions that require mitigation of significant impacts to all impacted communities.
Accordingly, AB 1001 will create substantial new legal liability for local governments by substantially limiting their discretion to determine what projects should be approved and how and where mitigation should be applied to reduce significant impacts to less than significant on impacted communities.
Environmental Justice is Already Being Incorporated in California’s Planning and Zoning Laws
CEQA does not need to be expanded to incorporate environmental justice. Environmental justice is already substantially addressed in California’s planning and zoning laws and policies. This Legislature passed SB 1000 (Leyva, 2016) to advance Environmental Justice (EJ) in CA’s planning and zoning law by requiring every city and county to adopt new EJ land use elements in their comprehensive, long-term General Plans. The Governor’s Office of Planning & Research recently released 2020 EJ Guidance to cities and counties for implementation of SB 1000 – cities and counties are still going through this process. By requiring an environmental justice element inside all General Plans, cities and counties already must identify objectives and policies to reduce the health risks in their disadvantaged communities and promote civil engagement in the public decision-making process – exactly what AB 1001 is unnecessarily trying to force into CEQA. The Legislature should allow local governments to implement SB 1000 before greatly expanding CEQA.
While additional discussions about how to further support environmental justice communities are important, they do not and should not include upending and expanding CEQA, especially when doing so is unnecessary because existing laws already accomplish what this bill is trying to do, will increase liability on local lead agencies, exacerbate CEQA’s existing NIMBY abuse problem and worsen the state’s housing crisis.
For all of these reasons, we respectfully OPPOSE AB 1001 as a JOB KILLER.
Adam J. Regele,
Senior Policy Advocate for the California Chamber of Commerce On behalf of the following organizations:
African American Farmers of CA Agricultural Energy Consumers Association Alameda Chamber & Economic Alliance American Pistachio Growers
Anaheim Chamber of Commerce Big Bear Chamber of Commerce Brea Chamber of Commerce
Building Owners and Managers Association California Apartment Association
California Association of Realtors
California Building Industry Association California Business Properties Association California Chamber of Commerce California Cotton Ginners and Growers Association
California Farm Bureau California Food Producers California Fresh Fruit Association
California Hispanic Chambers of Commerce California Hmong Chamber of Commerce
California Independent Petroleum Association California Manufacturers & Technology Association
California Metals Coalition California Railroads
California Retailers Association California Walnut Commission Carlsbad Chamber of Commerce Chemical Industry Council of California Chico Chamber of Commerce
Citrus Heights Chamber of Commerce Corona Chamber of Commerce Danville Area Chamber of Commerce Elk Grove Chamber of Commerce
Far West Equipment Dealers
Fountain Valley Chamber of Commerce Fremont Chamber of Commerce Fresno Chamber of Commerce
Garden Grove Chamber of Commerce Gateway Chambers Alliance
Gilroy Chamber of Commerce Glendora Chamber of Commerce
Greater Coachella Valley Chamber of Commerce Greater Conejo Valley Chamber of Commerce Greater High Desert Chamber of Commerce Greater Riverside Chamber of Commerce Greater Stockton Chamber of Commerce
Harbor Association of Industry and Commerce Imperial Valley Regional Chamber of Commerce Industrial Environmental Association
Kings River Conservation District Kings River Water Association
La Cañada Flintridge Chamber of Commerce Laguna Niguel Chamber of Commerce
Lake Elsinore Valley Chamber of Commerce Livermore Valley Chamber of Commerce Lodi Chamber of Commerce
Long Beach Area Chamber of Commerce
Los Angeles Area Chamber of Commerce Los Angeles County Business Federation Menifee Valley Chamber of Commerce Murrieta/Wildomar Chamber of Commerce NAIOP of California
Newport Beach Chamber of Commerce Nisei Farmers League
Norwalk Chamber of Commerce Oceanside Chamber of Commerce Orange County Business Council
Pacific Grove Chamber of Commerce & Tourist Centers
Palos Verdes Chamber of Commerce Paradise Ridge Chamber of Commerce Pleasanton Chamber of Commerce Redondo Beach Chamber of Commerce Roseville Area Chamber of Commerce
San Juan Capistrano Chamber of Commerce San Leandro Chamber of Commerce
San Marcos Chamber of Commerce San Pedro Chamber of Commerce
Santa Clarita Valley Chamber of Commerce Santa Maria Valley Chamber of Commerce Santa Rosa Metro Chamber
Simi Valley Chamber of Commerce South Bay Association of Chambers of Commerce
Southern California Leadership Council Southwest California Legislative Council Torrance Area Chamber of Commerce Tri-County Chamber Alliance
Valley Industry & Commerce Association Visalia Chamber of Commerce
Western Agricultural Processors Association Western Growers Association
Western Independent Refiners Association Western States Petroleum Association
cc: Gabrielle Meindl, Senate Committee on Environmental Quality Tiffany Ryan, Office of Assembly Member Garcia
Legislative Affairs, Office of the Governor Scott Seekatz, Senate Republican Caucus
The Honorable Monique Limón California State Senate
1021 O St., Ste. 7530
Sacramento, CA 95814
SUBJECT: SB 1458 (LIMON) WORKERS’ COMPENSATION: DISABILITY BENEFITS: GENDER DISPARITY
OPPOSE – AS INTRODUCED FEBRUARY 18, 2022
Dear Senator Limón:
The California Chamber of Commerce and the organizations listed below respectfully OPPOSE your SB 1458 (Limón). SB 1458 is likely unconstitutional, undermines the workers’ compensation system, and conflicts with existing law.
SB 1458 Likely Violates Both the California and Federal Constitutions
While Section 4 of Article XIV of the California Constitution “grants to the Legislature ‘plenary power, unlimited by any provision of this Constitution to establish and enforce a complete system of workers’ compensation,” that power is not absolute. See Yosemite Lumber Co. v. Industrial Acc. Commission of Cal., 187 Cal. 774, 780 (1922) (“Nothing is added to the force of the provision by the use of the word ‘plenary.’ If the Legislature has power to do a certain thing, its power to do it is always plenary. It is merely surplus verbiage.”) Not only are there limitations to that power, but also the California Legislature is of course still subject to the federal Constitution.
Federal Constitution: SB 1458 mandates an increase in workers’ compensation benefits for workers solely based on sex. If a man and a woman make the same salary and suffer the same injury, the claims administrator is required to pay the woman higher workers’ compensation benefits because of her sex alone. No matter how well-intentioned, this raises several constitutional concerns:
Equal Protection Clause: The Equal Protection Clause prohibits states from denying persons equal protection of law. This is “essentially a direction that all persons similarly situated should be treated alike.” City of Cleburne, Tex v. Cleburne Living Center, 473 U.S. 432, 439 (1985). Laws that differentiate between people based on characteristics like sex, race, or national origin must survive a higher level of judicial scrutiny than other laws.
Where a law treats people differently based on sex alone, the law is unconstitutional unless it is substantially related to a sufficiently important governmental interest. Courts look at how well the law serves the stated objective and whether there is a less discriminatory approach available. While wage disparity is an important government interest, the bill is likely to fail because of its approach. First, the bill does not address the underlying issue. It does not seek to identify women who are being discriminated against in their pay or increase their wages. Rather, it focuses on a sliver of the population, injured female workers, and provides an increase to one obscure benefit that the vast majority of women will never receive.
Second, the bill is based solely on assumptions, not fact. The proposed increase in workers’ compensation benefits is not based on a finding that there is indeed discrimination, but rather on the difference in average pay between men and women at the
company as shown in the company’s DFEH1 pay data report. That report itself does not show pay disparity. It instead asks employers to categorize employees across broad job categories and broad pay scales. The EEOC, which developed the report template, has explicitly stated that it “d[id] not intend or expect that this data will identify specific, similarly situated comparators or that it will establish pay discrimination as a legal matter.”2 The report also does not capture the legal, bona fide reasons under Labor Code Section 1197.5 for which there may be pay differentials between men and women.
For companies that do not file a pay data report with the DFEH, the increase in pay is even more tangential: it is based on the national average pay differential between men and women. It is unlikely that SB 1458 would pass the required heightened level of scrutiny if challenged.
Due Process Clause: The Due Process Clause prohibits the states from depriving a person or entity of procedural protections. SB 1458 deprives employers of procedural protections by presuming that every single female employee is being discriminated against in their pay. The company is not afforded any rights or procedures to determine whether that is actually true or have that issue adjudicated.
Instead, SB 1458 automatically increases all workers’ compensation benefits for women based on that assumption. A company that does not discriminate will have their workers’ compensation benefits payout increased either based on the national average wage rates or because their report shows that women make less on average than men, regardless of the fact that no unlawful or unjust conduct occurred.
Even if it is not found to be unconstitutional, SB 1458 is fundamentally flawed. The bill applies wage averages to all workers, regardless of their specific circumstances or whether there is indeed discrimination occurring. Essentially, it presumes that every woman is being unlawfully discriminated against and to the same degree.
California Constitution: Article XIV, Section 4 provides that the Legislature has the power enact workers’ compensation laws to “create and enforce a liability on the part of any or all persons to compensate any or all of their workers for injury or disability”. Courts have deemed unconstitutional laws that exceed the bounds of this authority.
For example, in Six Flags, Inc. v. Workers' Comp. Appeals Bd., 145 Cal.App.4th 91 (Cal. App. 2006), the court considered whether the Legislature could statutorily extend workers’ compensation death benefits to heirs who were not dependents. The court held that the statute was unconstitutional because it exceeded the scope of the Legislature’s power:
“…the plenary power clause of article XIV, section 4, cannot be used to expand the Legislature's power beyond the purposes set forth in the other sections of article XIV, section 4, that is, to compensate workers or their dependents if the worker dies in the course and scope of employment.”
Similarly, here, SB 1458 likely exceeds the Legislature’s authority. The purpose of SB 1458 is to address one consequence of gender wage disparity (notably without actually adjudicating whether such a disparity actually exists), not to create or enforce a liability to compensate a worker for injury. The underlying purpose of SB 1458 is wholly separate from the intent and operation of the workers’ compensation system.
SB 1458 Undermines Fairness of the Workers’ Compensation System
In the present workers’ compensation system, employees are paid by a formula according to their current wages. The Labor Code sets forth specific formulas as to how to make these calculations that are adjusted annually. Those formulas include statutory minimums and maximums in benefits. The system is designed
1 Additionally, those reports are confidential, so a claims administrator has no access to them.
2 FR-2016-07-14.pdf (thefederalregister.org)
to provide claims adjustors with a fair means by which to calculate benefits so that injured workers are treated the same.
SB 1458 instead adjusts that formula based on one characteristic: sex. Multiple examples show how this would generate inequitable results between two women who suffer the same injury and earn the same wages:
- Woman 1 works for a company with 120 employees whose DFEH report shows that women make on average 5% less than men. Her benefits increase by 5%.
- Woman 2 works for a company with 10 employees, all of whom are female, who does not file a DFEH report. The national average difference in pay for her occupation is 20%. Her benefits increase by 20%.
- Woman 1 works for a company with 1,000 employees whose DFEH report shows that women make on average 5% more than men. Her benefits remain unchanged.
- Woman 2 works for a company with 10 employees, all of whom are female, who does not file a DFEH report. The national average difference in pay for her occupation is 20%. Her benefits increase by 20%.
- Woman 1 works for a company with 1,000 employees whose DFEH report shows that women make on average 5% more than men. Her benefits remain unchanged.
- Woman 2 works for a company with 90 If the company did file a DFEH report, it would show that women, on average, make the same as men. The national average difference in pay for her occupation is 20%. Her benefits increase by 20%.
The above examples demonstrate how ludicrous this bill would operate in practice. Even if amendments were taken to key all increases off of the national averages, which the sponsors have suggested as a potential alternative, the underlying flaw in this bill remains the same: that the proposed benefit increases rest on pure assumptions, not facts about whether a female employee is being fairly paid.
SB 1458 Conflicts with Labor Code Section 4453
Labor Code Section 4453 provides for minimum and maximum wages for purposes of temporary and permanent total disability payments as well as for permanent partial disability payments. If a worker were entitled to an increase under SB 1458 that pushed their payment total over those statutory maximums, this would create a conflict between the two provisions.
Further, SB 1458 does not address workers who have multiple employers and would therefore either have different DFEH reports or it is possible that one files a report and the other does not. This creates further conflicts with Labor Code Section 4453(c)(2), which provides:
Where the employee is working for two or more employers at or about the time of the injury, the average weekly earnings shall be taken as the aggregate of these earnings from all employments computed in terms of one week; but the earnings from employments other than the employment in which the injury occurred shall not be taken at a higher rate than the hourly rate paid at the time of the injury.
SB 1458 Creates Conflicts Between State Agency Authority
The Workers’ Compensation Appeals Board (WCAB) presently has jurisdiction over workers’ compensation benefits. However, the Department of Industrial Relations (DIR) and DFEH are tasked with enforcement of the Equal Pay Act and Fair Employment and Housing Act, which govern the underlying issue of pay discrimination. If there were any sort of dispute over whether a worker should be owed increased benefits,
it is unclear which agency properly would have jurisdiction because neither department is expected to deal with both workers’ compensation and alleged pay discrimination.
For these reasons, and others, we respectfully OPPOSE your SB 1458.
Ashley Hoffman Policy Advocate
California Chamber of Commerce
cc: Legislative Affairs, Office of the Governor AH:am