Wed, December 17, 2014

California Labor Laws – 2014

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2014 California Labor Law Updates

Each year, the California legislature passes new employment laws, or updates existing laws, that directly impact the way employers do business in the state. 2014 was no exception. Dozens of new 2014 California labor laws are effective on January 1, with others going into effect later in the year.


Wage and Hour

AB 10 – Minimum Wage

AB 10 increases the minimum wage in California by two $1 increases. Effective on July 1, 2014, the new minimum wage will be increased to $9 per hour, and on January 1st, 2016 it will be raised an additional dollar to $10 per hour. The law requires employers to give notice to their employees 7 days prior to the effective date via a pay notice or other written notice.

AB 241 – Domestic Work Employees

This law provides specific overtime compensation for certain “in-house” employees. By definition, this employee must be a “domestic work employee who is a personal attendant.” It does not include casual babysitters. Many definitions and exclusions are included in the law, so those with “in-house” assistance are advised to carefully review the application of the legislation.

Federally, the U.S. Department of Labor declared new rules on personal attendants which will take effect January 1st, 2015 while the California law goes into effect on January 1st, 2014.

SB 435 – Meal and Rest Periods – Expansion to Heat Illness Recovery Periods

This law acts as an expansion to the current meal and rest-break law that gives employees a “recovery” period in order to protect them from heat illness. An employer cannot require an employee to work during this recovery period; this is mandated by state law under Cal/OSHA’s heat illness standard.

Employees working in outdoor environments are subject to Cal/OSHA’s heat illness standard which grants workers cool-down periods. These periods are for a minimum of 5 minutes per time, on an “as-needed.”

AB 442 – Damages for Minimum Wage Violations

AB 422 expands employer penalties issued by the Labor Commissioner for failing to pay minimum wage. For all violations, employers will be required to pay liquidated damages to the employees in addition to the existing penalties. “Liquidated damages” is financial compensation awarded to an employee for a loss or injury resulting from the employer’s failure to pay the minimum wage.


Leaves and Benefits

SB 288, SB 400 and AB 11 relate to permissible time-off of work under specific circumstances.

SB 228 allows employees to appear in court proceedings for specific crimes, such as solicitation for murder and vehicular manslaughter while intoxicated. Violations of the law will be enforced by the Labor Commissioner and employees must comply with requirements for requesting the leave.

SB 400 expands existing protections for victims of domestic violence, sexual assault and victims of stalking. These protections include taking time off to appear at legal proceedings and to seek medical/psychological treatment including safety planning (only for employers with 25 or more employees). SB 400 also adds a new reasonable accommodation under this statute that may include implementation of safety measures for these types of victims.

AB 11 requires an employer with 50 or more employees to provide a temporary leave of absence of up to 14 days per year for reserve peace officers and emergency rescue personnel to receive training. The current law allows training leave of absences for volunteer firefighters only.


Discrimination and Retaliation Protections

AB 556 – Protection for Military and Veterans

“Military and Veteran Status” is now added to the list of categories protected from employment discrimination under the Fair Employment and Housing Act.

SB 292 – Sexual Harassment Definition Clarified

This law clarifies further that sexual harassment does not need to be provoked by sexual desire. Hostile treatment can result in unlawful sexual harassment whether the behavior was motivated by sexual desire or not.

AB 263 – Protections for Exercising Rights Under Labor Code

AB 263 protects employees who assert their rights from being retaliated against by the employer. Currently this law only prohibits discharge and discrimination.

AB 263 also adds a procedure to specifically include a written or oral complaint by an employee that he or she is owed unpaid wages. If an employer fails to abide by this law, civil penalties of up to $10,000 per employee per violation may apply.

AB 263 expanded further in Immigrant Protections section below.


Immigrant Protections

AB 263 – Retaliation and Unfair Immigration Practices

This law prohibits an employer from engaging in “unfair immigration-related practices” when an employee declares their protected rights. Specifically, an employer may not threaten to contact, or contact, immigration authorities because an employee complained that he or she was paid less than the minimum wage.

SB 666 – License Revocation for Threatening to Report Immigration Status; and

AB 524 – Criminal Extortion for Threatening to Report Immigration Status

These laws prohibit employer s from reporting, or threatening to report, an employee’s immigration status to the immigration authorities.

AB 524 sets the standard that if a person threatens to report the immigration status or suspected immigration status of an individual, his or her relative or a member of his or her family then that person may be guilty of criminal extortion.

AB 666 allows the state to suspend or revoke an employer’s business license if the employer reports, or threatens to report, the immigration status of a current or former employee, or an employee’s family member, because that employee makes a complaint about employment issues.

Employers are not subject to the suspension or revocation of a business license for requiring a worker to verify eligibility for employment under Form I-9.

AB 60 – Driver’s License for Undocumented Immigrants

AB 60 requires the California Department of Motor Vehicles (DMV) to issue a driver’s license to an undocumented person who can prove identity, California residency and who can meet all other licensing requirements, such as the written and behind-the-wheel exams.

This card will not be acceptable for federal purposes and will be noted on the driver’s license. This may not be used to verify eligibility for employment or be an acceptable I-9 Form. This will not take effect until January 1st, 2015 or as soon as the Department of Motor Vehicle’s director executes a specific declaration, which can be before the estimated date.


SUPPLEMENTAL WAGES Rate (flat rate withholding method)25%Over $1 million39.6% (No change from 2013)WITHHOLDING
The 2014 withholding tables have not been finalized, as Congress has not yet finalized their decision on whether to adjust the tax rates. Any changes in the withholding tables will be communicated once they have been announced. 401K PLAN LIMITS: Elective Deferrals$17,500 (No change from 2013)401K Catch Up Contribution Deferrals$5,500 (No change from 2013)Maximum 401K contribution (employer and employee)$52,000 (up from $51,000 in 2013)Maximum employee compensation towards contributions$260,000 (up from $255,000 in 2013)HSA PLAN DEFERRAL LIMITATIONS Individual Maximum Contribution (Includes Employer Contribution)$3,300 (up $50 from 2013)Family Maximum Contribution (Includes Employer contribution)$6,550 (up $100 from 2013)Catch-up Contributions (55+ years old)$1,000 (No change in 2013)CALIFORNIA ONLY: SUPPLEMENTAL WAGE WITHOLDINGS Bonuses & Earnings from Stock Options10.23% (No change from 2013)Other Supplemental Earnings6.60% (No change from 2013)DISABILITY INSURANCE (Employee Paid) Maximum 2014 Wages Subject to Withholding$101,636 (up $756 from 2013)Employee 2014 Withholding Percentage1.0% (No change from 2013)Employee 2014 Maximum Deduction$1016.36 (up $7.56 from 2013)

Maximum Taxable Earnings $117,000
Employer/Employee 2014 Withholding Percent 6.2%
Employer/Employee 2014 Maximum Withholding $7,254.00
(up $204.60 from 2013 for ER and EE)
FICA (Medicare)
Maximum Taxable Earnings No Limit
Employer/Employee 2014 Withholding Percentage 1.45%
Employer/Employee 2014 Maximum Withholding No Limit, no change from 2013
Additional Medicare Tax for Wages in Excess of $200,000 Rate 0.9%
(No limit, no change from 2013)

California Workers’ Compensation Rates in 2014

Following months of speculation and anticipation, California Insurance Commissioner Dave Jones officially approved a 7.6% increase for California workers’ compensation pure premium rates in 2014.

The Back-Story

Throughout the second half of 2013, the California WCIRB (Workers’ Compensation Insurance Rating Bureau) had fluctuated in its recommended increases for 2014 insurance rates. In August, it was expected that increase would range between 4% – 5%. However, that number continued to rise, reaching 7.8% in September, and peaking at 9.6% in October. The final increase approved by Commissioner Jones settled at 7.6%.

The Bureau explained that the amended filing is to cover expected higher costs from California’s new Medicare-style payment system for physicians reimbursements. This new system, which was mandated by last year’s workers’ compensation reforms, and which was developed and adopted by the Division of Workers’ Compensation (DWC), is known as a resource-based relative value scale (RBRVS) system.

What is RBRVS?

Briefly, in the RBRVS system, payments for medical services are determined by the estimated costs needed to provide them. The cost of providing each service is divided into three components: practice expense, physician work, and professional liability insurance. Payments for services are calculated by multiplying the total combined costs of the service by a conversion factor, and adjusted for geographical differences in various resource costs.

On September 24, 2013, a new Physician Fee Schedule was filed with the Secretary of State and will be published in the California Code of Regulations, effective January 1, 2014. The changes and reforms in payment reimbursements were mandated in Senate Bill (SB) 863. While the new payment system will be phased in over the next four years, the Bureau estimates that two-thirds of all medical payments to paid on 2014 policies will incur the full impact of the change.

Dr. Rupali Das, Executive Medical Director of the Division of Workers’ Compensation (DWC) states:

“Adopting a payment schedule based on the RBRVS will increase fairness in reimbursement across the spectrum of medical services, help to reduce disputes regarding the reasonable value of medical services, and improve injured workers’ access to the most needed medical services.”

Based on actuarial projections, the Bureau estimates that the new system will increase physician costs by more than seventy percent for new 2014 policies.

While the WCIRB recommendations are heavily considered, California Insurance Commissioner Dave Jones was not required to follow them. He could have accepted, rejected or modified the Bureau’s proposed rate increases. Furthermore, while the state’s workers’ compensation insurers typically follow the commissioner’s guidance, they too are not required to do so.

Ultimately, the Insurance Commissioner’s approved increase of 7.6% fell short of the Bureau’s recommendation of 9.6%. So while California employers may be disheartened by the prospect of increased workers’ compensation rates in 2014, they should be reassured that things could have been far worse.

CPEhr offers alternatives to standard vs. traditional workers’ compensation insurance programs. We work with A+ rated carriers yet can offer small and mid-sized employers the administrative support and economies-of-scale typically enjoyed by larger businesses. Contact CPEhr for more information.


Following is an overview of the most important updates relating to the Affordable Care Act in the coming two years. Please note: the ACA may continue to change and evolve over the coming months and years, so be sure to consult with your insurance professional as needed.

The Employer Mandate, originally scheduled to take effect in 2014 has been delayed until 2015: The Affordable Care Act does not require businesses to provide health benefits to their employees, however, if a large employer (50 or more full-time equivalents) chooses not to offer a health plan or chooses to offer a plan that does not meet the minimum requirements of the law (affordable health plan), then the large employer is subject to the segment of the law which establishes employer penalties. In general, there are 2 penalties: A $2,000 per employee (minus the first 30) penalty for a large employer not offering coverage; and for employers who offer coverage which does not meet the minimum requirements of the law, a $3,000 penalty for any employee who receives subsidized coverage through the Exchange. Enforcement of the penalty was originally scheduled to begin in January 2014, however, in July 2013 the Agencies announced a one year delay, giving employers a reprieve until January 2015.


Information Reporting, originally scheduled to take effect in 2014 has been delayed until 2015: The Agencies also delayed the segments of the law related to information reporting. Employers and other reporting entities are encouraged to voluntarily comply with the reporting rules during 2014, however, future guidance will detail the requirements which are now scheduled to be due in 2015.


Individual Mandate: Effective 1/1/14 the government will require most Americans to have health insurance. Individuals, including children, who don’t have coverage and who are not in one of the groups that is an exception to the rule, will pay a penalty. In 2014, the penalty is $95 or 1 percent of taxable income, whichever is greater. In 2015, the penalty will be $325 or 2 percent of taxable income, and in 2016 the penalty will be $695 or 2.5 percent of taxable income. Each year after 2016, the government will publicize the penalty based on a cost-of-living adjustment. To help the uninsured meet the cost of mandated insurance, the government will offer premium credits and cost sharing subsidies to people who meet certain income guidelines and if they enroll in one of the new state-run insurance exchanges and if their employer does not offer them affordable coverage.


Employer Notice Requirement (Market Place Notice): Effective 10/1/13 employers were required to provide a Market Place Notice to all employees. This is a continuing requirement. New employees must receive the notice within 14 days of their date-of-hire. CPEhr manages this requirement for employees on CPEhr health plans.


Eliminating Annual Limits on Insurance Coverage: Effective 1/1/14 the law prohibits new plans and existing group plans from imposing annual dollar limits on the amount of coverage an individual may receive.


Ensuring Coverage for Individuals Participating in Clinical Trials: Effective 1/1/14 Insurers will be prohibited from dropping or limiting coverage because an individual chooses to participate in a clinical trial. Applies to all clinical trials that treat cancer or other life-threatening diseases


Coverage Documentation: Effective 1/1/14 health plans must provide coverage documentation to both covered individuals and the IRS


Establishing Affordable Insurance Exchanges: The law creates a state-based Market Place, also called Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which individuals and small businesses can purchase qualified coverage. Exchanges began taking applications in October 2013 for a January 1, 2014 effective date.


Health Insurance Premium and Cost Sharing Subsidies: Effective 1/1/14 the new Market Place also called the Exchange, will administer tax credits and cost sharing subsidies to qualifying individuals who purchase coverage through the Exchange. Eligibility is based on household income and size of the individuals household.

Increased Access to Medicaid: States that implement that ACA’s medicaid expansion will gain a population of people who will become newly eligible for medicaid effective 1/1/14. Starting 1/1/14, coverage for the newly eligible adults will be fully funded by the federal government for three years. It will phase down to 90% by 2020.


Employers offering coverage through a Small Group health plan have a number of small-group specific provisions to contend with, some of which are listed below:

Essential Health Benefits: Creates an essential health benefits package that provides a comprehensive set of services and creates four categories of plans to be offered through the Exchanges, and in the individual and small group markets.

Guaranteed Availability of Insurance: Requires guarantee issue and renewability of health insurance regardless of health and allows rating variation based only on age (limited to a 3 to 1 ratio), geographic area, family composition, and tobacco use (limited to 1.5. to 1 ratio) in the individual and the small group market and the Exchanges.

Increasing the Small Business Tax Credit: The law implements the second phase of the small business tax credit for qualified small businesses and small non-profit organizations. In this phase, the credit is up to 50% of the employer’s contribution to provide health insurance for employees. There is also up to a 35% credit for small non-profit organizations. Applies only if coverage is purchased through the Exchange.