California Labor Laws

1 California Labor Laws Non governmental employers are increasingly being subjected under Legislative regulations. The regulations work against the voter's quest for a balanced state budget, a vibrant economy and lowered taxes. Many bills targeting regulation of employers were proposed but majority did not pass through. Among the bills that were rejected are AB482, AB2187 and SB 1121. AB 482 sought to restrict employers from seeking immediate information regarding their potential employee. This bill would have exposed employers to risks of hiring people without enough background information about them.

AB 2187 sought to make it a crime for an employer who does not pay full wages to an employee who gets fired or an employee who resigns less than 90 days before the wages are due.

This is besides the extra civil penalties in place. SB1121 sought to abolish overtime exemption for people working in agricultural sector.

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2 This would have affected the competitiveness of California (Invencevich, 2009). Despite the fact that the above bills and many others were never approved, still there are a number of state and federal laws that have an impact on private employers. Some of these laws include: The Independent Contractor Scrutiny; this law is considered as a way of the government trying to generate revenue from employers found to wrongly group their workers as independent contractors by penalizing them. The enforcement of this law will increase treasury receipts.

Employers with valid independent contractors are not subject to much employment and tax regulation. However the classification can still attract many other regulatory measures from government agencies and employees hence employers need to make expert analysis to make wise decisions (Invencevich, 2009).

The use of marijuana for medical reasons is allowed under California law. Its use should be prescribed by a physician. However, employers have the legal right of banning employees from using it. This brings contention at work. If California proposition 19 was passed by voters, it would have discriminated employees, compromised safety measures and multiplied regulatory measures.

Heat illness regulations for outdoor activities require employers to provide sheds which can hold 25 percent of the employees at any given time, to offer employees a given amount of drinking water each hour worked, and to offer them at least 5 minutes cool down break on request. Employers in agriculture, construction, landscaping, oil and gas extraction, and heavy transport must employ high heat procedures such as proper communication, monitoring employees for any heat illness, ensuring employees are drinking water and giving new employees proper orientation. These laws are enforced by CAL-OSHA in places with temperatures over 85 degrees Fahrenheit (Invencevich, 2009).

3 Workers covered by legal collective bargaining agreement and working as commercial drivers, security officers, construction workers, in gas or local publicly owned electric utilities are not subject to the California’s meal period requirements. AB 569 amended California labor code Sec. 512 so that they are excluded.

Organ donors and bone marrow donors are given rights to take 30 days and 5 days leave respectively under SB1304. The leaves do not alter the terms of service as the concerned employees are entitled to fully pay and benefits. The donor leave is not affected by the Family and Medical Leave Act and the California Family Rights Act (Invencevich, 2009).

The American Recovery and Reinvestment Act 2009 required employers to subsidize COBRA premiums by 65% of nine months' group health care insurance for eligible employees involuntary terminated from service before May 31, 2010. The act requires all subsidy payments to continue until August 31, 2011. Employers get the premium refund on filing quarterly federal employment tax returns.

IRS released W-2 forms for use by employers to report wages and employee tax withholding as from January 1, 2011. Employers are required to submit quarterly returns instead of annual returns to the California Employment development department.

The equal employment opportunity commission also made regulations on the federal Genetic Information Nondiscrimination Act (GINA). Under the Gina regulations, it is illegal for employers to use genetic information in making personnel decisions. The act also limits the employers from obtaining such information as DNA tests of job applicants, employees and medical information of their kin. However, the employers usually keep that information in confidential files and not in personnel files and thus cannot make use that information to make

4 personnel decisions. The commission also established GINA rules to be followed in seeking health related information (Invencevich, 2009).

The use of social media as a key strategy to promote business is also under regulation from bodies such as The Financial Industry Regulatory Authority (FINRA) and The Federal Trade Commission (FTC). FINRA effected guidelines over blogs and social networking websites, while the FTC also laid policies on online deceptive endorsements and advertising.

FTC requires a writer to declare any material relation to the person endorsing it. FTC also intends to make employers accountable legally for what is posted by the employee.

The federal Hiring Incentives to Restore Employment Act enacted in March 18, 2010 offers tax breaks for employing qualified workers not previously employed. The employers get a payroll tax relieve of 6.2% on social security tax on wages paid to these employees as from March 19, 2010 to December, 31 2010. The businesses may also claim tax credit on 2011 income tax returns of up to $1,000 per worker retained more than 52 weeks (Invencevich, 2009).

The department of labor expounded on the FMLA the definition of son and daughter to include employees who have guardian responsibilities and as such, the employee is entitled to parental rights to family leave regardless of the legal or biological relationship.

The Dodd-Frank Wall street Reform and Consumer Protection Act was legalized to counter the upheavals in the financial markets. This act offers protection to whistleblowers through programs such as the creation of SEC and Commodities Futures Trading Commission (CFTC) and also widened protections under SOX. Under this act, whistleblowers in fields touching on consumer financial products are promised better incentives. Whistleblowers who volunteer original information to SEC or CFTC about abuse of securities or commodities

5 regulations are rewarded with an incentive of between 10% and 30% of fines imposed by the commissions (Invencevich, 2009).

Employing people not legally qualified to work in the U.S. may attract fines and criminal action. Through information sharing and use of E-verify, employers have to determine the legality and are required to verify records of their new employees.

Implications of the Labor Laws The increased labor laws can have a lot of implications on the economy. While these laws are intended to make social or economic benefits that are unlikely in a free market, these regulations carry hidden costs. The most obvious costs are on the government side in terms of paying the regulatory agents such as IRS in the implementation of these laws. To the private employers, the regulations in most cases increase tax expenses, lower production and lower taxable incomes. The IRS W-2 forms for reporting wages and employee tax withholding on a quarterly basis is an example of some direct costs employers have to incur since they must spend valuable time preparing them (Heredia, 2002).

Continued regulations can result to business restructuring. The types of goods produced and services rendered by businesses have to be changed. The employers thus have to put in more resources to deliver the same results. The extra cost is reflected in the final price the consumers have to pay for the commodities or services. At the same time, the consumers may switch to substitute products or services which may be much cheaper. The cost of production is thus raised (Heredia, 2002). Employees also get affected by these regulations as they are likely to be paid less for their services. Generally, people can get discouraged and withdraw their input in production process with a consequence of a decrease in gross domestic production and income.

6 Integrating these laws in the business processes consumes a lot of time through negotiations with stakeholders and the enforcement agents. This means that making decisions in businesses gets delayed. As a result of increased production costs, most employers will seek to reduce their running costs. One way of cutting the costs is through downsizing. Therefore many of these regulations can lead to increased retrenchments and unemployment rates. The federal laws raise the cost of hiring employees and decrease employment and wages. The government requirements such as the increased paperwork, display of posters, notices and pamphlets raise the operation costs to employers than the benefits accruing from hiring new employees (Heredia, 2002).

These laws may however carry social and economic benefits as well. An example is the heat illness regulation for outdoor workplaces. Reducing the exposure of employees to unsafe conditions may increase labor supply to the market. It may lead to reduced medical costs as job related illnesses or injuries are minimized. The regulations thus help in ensuring that the workplaces are safe and health (Heredia, 2002).

The laws may also serve to offer protection to employees against discrimination at work.

Genetic Information Nondiscriminatory Act limits employers from using genetic information to influence their decisions. The employers are also limited in basing their hiring decisions on the credit history of people.

The American Recovery and Reinvestment Act 2009 and Independent Contractor scrutiny laws help protect the welfare of the employees. Employers misclassify independent contractors to avoid payroll and personal income taxes. The independent contractor and scrutiny law enhances social protection of workers like unemployment insurance and compensation. The law also helps establish all employers at equal playing field (Heredia, 2002).

7 References Heredia, M. (2002). Laws Impact California Employers. San Diego Business Journal, 23(41), 15.

Ivancevich, J., M. (2009). Human resource management (5th ed.). Irwin: McGraw-Hill Professional Publishing.