As the 2018-2019 legislative session comes to a close, it’s time to take stock of the new laws affecting California’s business community that were forwarded to the governor’s desk for approval in recent weeks.
A bill to codify the California Supreme Court’s 2018 Dynamex Operations West, Inc. v. Superior Court of Los Angeles ruling into state law passed the state legislature on September 11 and has been sent to Gov. Gavin Newsom’s desk for final approval. In its ruling, the court issued a clarification of the standards companies have to meet in order to classify workers as independent contractors rather than employees. The stricter standard, commonly referred to as the ABC Test, replaces the previously used Borello Test, which had been in use since a court ruling in 1989.
In order to classify workers as independent contractors, who are not entitled to many of the rights and protections afforded to employees, the new ruling requires companies to prove that workers are: A) free from “the control and direction of the hiring entity in connection with the performance of the work,” B) performing work that is “outside the usual course of the hiring entity’s business” and C) are “customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.”
Assembly Bill 5 reflects the language of the court ruling with respect to the standards set forth for classifying workers, but carves out exemptions for licensed professionals in certain industries, including insurance agents, certain health care workers, barbers and cosmetologists.
The California Chamber of Commerce (CalChamber) placed Assembly Bill 5 on its 2019 Job Killer List, and the bill has received pushback from a number of major players in the gig economy, such as Lyft, Uber and Doordash, who rely heavily on independent contractors. The bill is supported by the California Labor Federation and labor unions. On the day of its passage in the state assembly, a California Uber driver filed a proposed class action lawsuit against the company, invoking misclassification. Newsom expressed his support for the bill in a Labor Day op-ed in the Sacramento Bee.
Rent Control And Tenant Protections
A bill seeking to place a temporary cap on rent increases, as well as set forth stricter rules for tenancy termination, is also awaiting Newsom’s signature after passing the state legislature on September 11. Assembly Bill (AB) 1482 would prohibit rent increases of more than 5% plus cost of living increases, or 10% of the lowest rent charged for the same unit in the preceding year –whichever is lower – until January 1, 2030.
The bill would also require landlords to provide tenants with a cause for terminating their lease and offer an opportunity to rectify issues leading to the termination of their tenancy. If a tenant’s lease is terminated without just cause, as defined by the bill, tenants are entitled to relocation benefits equal to the cost of one month’s rent or a rent waiver for the final month of their tenancy. Only tenants who have lived in their unit for 12 months or more qualify for the protections set forth in the bill.
If signed into law, the bill would supersede any less protective local laws, including an ordinance recently adopted in Long Beach that carved out exemptions for small property owners. AB 1482 instead includes exemptions for some live-in landlords, specialty housing such as college dormitories, and housing that was certified for residential use within the past 15 years.
The bill went through a series of amendments, with realtor and landlord associations remaining neutral on some versions of the bill while opposing others. In its final version, AB 1482 is opposed by the California Association of Realtors. Newsom, who was involved in crafting the bill’s final version, released a joint statement with the bill’s authors on August 30.
“The high cost of housing and rising rents are preventing California families from getting ahead. These steep housing costs drive inequality and threaten to erode California’s economic growth,” the joint statement by Newsom, Senate President pro Tempore Toni Atkins, Assembly Speaker Anthony Rendon and Assemblymember David Chiu read. “That’s why we are pleased to announce we have come to an agreement on a series of amendments to AB 1482 that would create strong renter protections. The bill will protect millions of renters from rent-gouging and evictions and build on the Legislature’s work this year to address our broader housing crisis.”
Assembly Bill 9, which would extend the period during which employees or tenants can file a discrimination complaint based on the California Fair Employment and Housing Act, also passed the state legislature on September 9. Currently, employees and tenants have one year from the date the alleged discriminatory action took place to file a complaint. AB 9 would extend that period to three years. The bill has been forwarded to the governor for final approval.
Extended Alcohol Sales
Senate Bill 58, State Senator Scott Wiener’s second attempt at extending last call for alcohol sales, made it through the state senate following several amendments, but failed to pass the assembly. In its current version, the bill would have given 10 California cities, including Long Beach, Los Angeles and West Hollywood, the option of extending last call to 3 a.m. The bill’s co-author, Assemblymember Miguel Santiago, whose district includes Downtown Los Angeles, filed a motion to reconsider the bill when it failed to pass the assembly on September 14.
In another returning legislative proposal, Assemblymember Lorena Gonzalez has brought back a bill that would prevent employers from requiring prospective employees to sign arbitration agreements as a condition of employment. Assembly Bill 51 is Gonzalez’ second attempt to curb employment-related arbitration agreements, after last year’s bill was vetoed by then-Governor Jerry Brown. CalChamber included the bill on its 2019 Job Killer List. AB 51 passed both the state assembly and senate and is on its way to the governor’s desk.
Hotel And Consumer Products
A bill banning small plastic bottles of shampoo, body wash and other personal hygiene items commonly provided to hotel guests passed the state assembly on September 9 and has been forwarded to the governor for final approval. The bill is part of a larger effort by state legislators to reduce the amount of single-use plastics in circulation in California and promote re-usable or refillable options instead. Starting January 1, 2023, for hotels with 50 or more rooms, and a year later for hotels with 50 rooms or less, Assembly Bill 1162 would make the distribution of these small plastic bottles to hotel guests punishable through fines of up to $2,000 for repeated violations.
Another bill that passed the state legislature this month and is awaiting the governor’s signature would ban the import, production and possession with intent to sell any fur products in the state. Assembly Bill 44, which was authored by 43rd District Assemblymember Laura Friedman, carves out exemptions for taxidermy pieces, cowhides and several other products involving animal skin and hair. Used fur products are also exempt.
Charter School Reform
The end of this year’s legislative session also had some significant changes in store for California’s charter schools. Two bills, both co-authored by 70th District Assemblymember Patrick O’Donnell, passed the state legislature earlier this month.
Assembly Bill 1505 changes the process for authorizing or renewing a charter school application by allowing the governing board of the authorizing school district to consider how the charter school would impact the district and other schools in it. Assembly Bill 1507 would mandate charter schools to operate only within the geographic boundaries of the school district that authorized their application. Previously, a charter school could receive authorization in one school district and, once approved, set up shop in another.