California Legislature and Courts Act on Dynamex Issues
The Assembly Labor and Employment Committee this week gave its approval to AB 5 (Gonzalez, D-San Diego) to codify the “ABC test” for workers from the Dynamex decision by the California Supreme Court, which severely restricted the ability of employers to hire workers as independent contractors. Amendments have been taken recently that would exempt insurers and brokers from the provisions applying the test.
The Dynamex decision, issued last year by the California Supreme Court, dramatically changed state law on independent contractors. Historically, administrative agencies and courts have developed a variety of rules for distinguishing employees from independent contractors. While the exact scope of those rules varied, all were focused at their core on the extent to which an employer did or could “control” the actions of the worker; the greater the level of control, the more likely the worker was to be regarded as an employee.
In Dynamex, the Supreme Court effectively threw out the old rules and adopted a new “ABC test.” To qualify as an independent contractor, an employer must now prove all of the following:
A) That the worker is free from the control and direction of the hirer in the performance of the work; and
B) That the worker performs work outside the usual course of the hiring entity’s business; and
C) That the worker is customarily engaged in an independently-established trade, occupation or business of the same nature as the work being performed for the hiring entity.
AB 5 will be heard next in the Assembly Appropriations Committee, where additional technical amendments are expected.
Also, this week U.S. District Judge Morrison C. England, Jr. dismisses a lawsuit filed by the Western States Trucking Association challenging the Dynamex decision on the grounds that the “ABC test” is preempted by the Federal Aviation Administration Authorization Act of 1993 and federal safety regulations. The lawsuit also argued the decision violates the Commerce Clause of the U.S. Constitution. Attorney General Xavier Becerra issued a press release in support of the dismissal.
A copy of the court’s decision can be found here.
CEA Proposes Tax on Insurance Policies
A newly amended bill, SB 254 by Democratic Majority Leader Robert Hertzberg, proposes to allow the CEA Board of Directors to impose up to a 5% assessment (tax) on all but a few excluded lines of insurance for up to 10 years as part of providing new financing to support the Authority. The bill sponsored by the CEA is intended to use the assessment to replace almost $4 billion dollars of reinsurance currently being purchased by the Authority and to expand their homeowner retrofit program.
The CEA was created in 1996 to offer a minimum limits earthquake policy for the residential clients of the major homeowners’ insurance underwriters in California, including Farmers, State Farm, Allstate, and others. As constructed the CEA was financed by initial contributions of the member companies, reinsurance, and contingent assessments on participating insurers and their policyholders. Non-participating insurers and their policyholders have no financial responsibility for the CEA and continue to be required to offer earthquake insurance to their customers on their own paper or through another insurer.
The CEA is one of the largest purchasers of reinsurance and has been looking for a way for years to reduce their costs for this critical part of their overall financing. SB 254 would replace some of the CEA’s reinsurance with a contingent assessment on a broad array of residential and commercial lines of insurance, including insurance underwritten by non-CEA member companies and non-admitted insurance written through surplus line brokers. These assessments would be passed through to the purchasers of lines of insurance with the exception of renters, life, health, annuity, title, financial guarantee, earthquake, mortgage, insolvency, workers’ compensation, medical malpractice, and automobile insurances. All other classes of insurance listed under Section 100 of the Insurance Code would be assessable, including commercial property and liability, boiler and machinery, surety, fire, liability, and aircraft and marine insurances.
To make things even more confusing, the only policies that will be assessed are those written for individuals and companies that are located in High Seismic Zones which would include virtually all of coastal California.
SB 254 will likely pit the CEA and its member companies against non-member insurer interests, as well as commercial purchasers of insurance policies not excluded from assessment by the bill. The bill is scheduled to be heard in the Senate Insurance Committee on Wednesday, April 24.
Legislative Women’s Caucus Works to Strengthen Lives of Women and Families
On Tuesday, April 2, the California Legislative Women’s Caucus announced a package of legislation and budget action items to further improve the lives of women and their families, as well as the economic future of communities across the state. The Women’s Caucus has continued to push forward legislation on pay equity for women, expand access to child care, repeal the Maximum Family Grant Rule, and other women- and family-oriented measures.
The Legislative Women’s Caucus has established five pillars that guide their priority legislation and budget action for 2019: workplace equity, family-friendly policies, access to child care, health & safety, and protecting vulnerable communities.
Workplace Equity
AB 378 (Limón) – Gives child care providers the right to collectively bargain with the State of California and to advocate for the children and families they serve.
Family-Friendly Policies
SB 135 (Jackson) – Ensures nearly all Californians who pay into the state’s Paid Family Leave program can use it without fear of job loss; more newborns can receive individual at-home care for their first six months of life; and safeguards California's leave laws reflect the state's diverse, intergenerational family, and caregiving needs.
AB 24 (Burke) – Enacts the Targeted Child Tax Credit which would provide increased support for California families living in poverty.
AB 196 (Gonzalez) – Ensures workers utilizing the state's Paid Family Leave program can receive 100 percent wage replacement during the period of their leave.
Access to Child Care
SB 174 (Leyva) – Addresses ongoing problems with the bifurcated rates within the Early Care and Education system by establishing a single regionalized reimbursement rate system for child care, preschool, and early learning services.
SB 321 (Mitchell) – Aligns CalWORKs Stage 1 child care rules with all other subsidized child care programs in California, including Stages 2 and 3.
AB 324 (Aguiar-Curry) – Creates guidelines for an Early Care and Education (ECE) professional development and retention system to strengthen, recruit, and retain the ECE workforce.
Health & Safety
SB 464 (Mitchell) – Recognizes and addresses clear inequities in pregnancy and birth outcomes for black women and children by requiring implicit bias training for all perinatal providers in hospitals and birthing clinics; also requires data collection by the Department of Public Health.
AB 31 (Garcia) – Repeals the sales tax on menstrual products.
AB 577 (Eggman) – Extends Medi-Cal postpartum care from 60 days to one year for women diagnosed with a maternal mental health disorder, ensuring no gap in coverage, and maintaining continuity of care.
Protecting Vulnerable Communities
SB 611 (Caballero) – Calls on the Governor's Office to establish the Master Plan for Aging's Housing Older Persons Effectively (HOPE) Task Force.
AB 629 (Smith) – Creates parity within the California Victim Compensation Program for victims of human trafficking by allowing them to receive compensation for their direct economic losses.
Legislative Update – Committees Ramp Up Policy Hearings
As more spot bills get amended with substantive language, policy committees are ramping up their efforts to hear and vote on the hundreds of bills they have received already. Below please find a short summary of the amendments inserted into the bill this past week and a link to the new text of the bills.
Labor-related
AB 170 (Gonzalez): Requires a client employer to share with a labor contractor all civil legal responsibility and civil liability for harassment for all workers supplied by that labor contractor – Passed the Asm. Judiciary Committee on an 8-3 vote; will be heard next on Asm. Floor for a vote of the house.
AB 403 (Kalra): Extends the period by a person who believes they have been discharged or discriminated against to file a complaint with the Division of Labor Standards Enforcement to within 3 years after the occurrence of the alleged violation – Passed the Asm. Labor & Employment Committee on a 5-1 vote; will be heard next by the Asm. Judiciary Committee on 4/23.
AB 648 (Nazarian): Prohibits health care service plans and insurers from sharing any personal information or data collected through a wellness program, and would prohibit health care service plans or insurers from taking any adverse action against an enrollee or member – Passed the Asm. Labor & Employment Committee on a 6-1 vote; will be heard next by the Asm. Appropriations Committee.
AB 1224 (Gray): Creates an additional employee leave program and would make it an unlawful business practice to refuse a request for an employee to take up to 12 weeks of leave without a determination by their physician that they are disabled, so long as that employee has worked for 900 or more hours for any employer in the prior 12 months and all other conditions for taking leave under the CFRA are satisfied; stakeholders are working with Asm. Gray to ensure provisions are aligned with federal laws and there is no doubling of benefits – Passed the Asm. Labor & Employment Committee on a 5-1 vote; will be heard next by the Asm. Insurance Committee.
AB 1478 (Carrillo): Would authorize an employee aggrieved under the Private Attorneys General Act of 2004 to bring a private civil action against the employee’s employer and would not require that employee to pursue any other remedy prior to bringing that action – Passed the Asm. Labor & Employment Committee on a 5-2 vote; will be heard next by the Asm. Judiciary Committee.
Insurance-related
AB 188 (Daly): Pertaining to fire insurance, would delete provisions regarding the actual cash value of the claim of total loss to the structure and instead require that the actual cash value of the claim, for either a total or partial loss to the structure or its contents, be the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction for physical depreciation based upon its condition at the time of the injury or the policy limit, whichever is less – Passed by Asm. Insurance Committee on a 14-0 vote; will be considered next on Asm. Floor for consent.
AB 207 (Daly): Increases the maximum fine for transacting insurance without a valid license to $70,000 - Passed by Asm. Insurance Committee on a 14-0 vote; will be heard next by the Asm. Appropriations Committee.
AB 295 (Daly): Until January 1, 2024, would require an admitted insurer with annual premiums written in California equal to or in excess of $100,000,000 to provide information to the Insurance Commissioner by July 1, 2021 on all of its community development investments, community development infrastructure investments, and green investments in California for the calendar years 2018, 2019, and 2020 – Passed by Asm. Insurance Committee on a 14-0 vote; will be heard next by the Asm. Appropriations Committee.
AB 548 (Rodriguez): Requires the California Residential Mitigation Program (CRMP), in administering the Earthquake Brace and Bolt program, to provide outreach to low-income households to increase awareness of the Earthquake Brace and Bolt program in communities where the program is offered, and set aside at least 10% of the funds available each year for the Earthquake Brace and Bolt program to provide supplemental grants – Passed by Asm. Insurance Committee on a 14-0 vote; will be considered next on Asm. Floor for consent.
AB 567 (Calderon): Establishes the Long Term Care Insurance Task Force in the Department of Insurance, chaired by the Insurance Commissioner or the commissioner’s designee, and composed of specified stakeholders and representatives of government agencies to examine the components necessary to design and implement a statewide long-term care insurance program with a recommendation report due by July 1, 2021 – Passed by Asm. Insurance Committee on a 13-1 vote; will be heard next by the Asm. Aging & Long Term Care Committee.
AB 932 (Low): Expands the scope of workers’ compensation benefits to apply when a firefighter engages in a fire-suppression or rescue operation, or the protection or preservation of life or property, outside of this state – Passed by Asm. Insurance Committee on a 14-0 vote; will be heard next by the Asm. Appropriations Committee.
AB 981 (Daly): Exempts insurance institutions, agents, and support organizations to which the Insurance Information and Privacy Protection Act applies from the California Consumer Privacy Act of 2018 – Passed by Asm. Insurance Committee on a 14-0 vote; will be heard next by the Asm. Privacy & Consumer Protections Committee.
AB 1065 (Berman): Would indefinitely authorize written records relating to the business of life insurance to be provided by electronic transmission if the insurer complies with the specified requirements – Passed by Asm. Insurance Committee on a 14-0 vote; will be considered next on Asm. Floor for a vote of the house.
AB 1099 (Calderon): Requires the disclaimer of a summary document to contain additional information, including, among other things, a statement of the types of policies or contracts for which the association will provide coverage and an explanation of the rights available and the procedures for filing a complaint to allege a violation of the California Life and Health Insurance Guarantee Association Act – Passed by Asm. Insurance Committee on a 14-0 vote; will be heard next by the Asm. Appropriations Committee.
AB 1104 (Calderon): Directs the Insurance Commissioner to appoint two additional members to the board of directors of the California Life and Health Insurance Guarantee Association who represent the public generally – Passed by Asm. Insurance Committee on a 14-0 vote; will be heard next by the Asm. Appropriations Committee.
AB 1538 (Weber): Provides that a first-party automobile physical damage claimant may opt to receive a monetary payment based on the value of the damage to the vehicle in lieu of having the vehicle repaired – Passed by Asm. Insurance Committee on a 14-0 vote; will be considered next on Asm. Floor for consent.
AB 1679 (Daly): Increases the per insured vehicle fees that insurers collect from their policyholders to fund the anti-fraud efforts of the Department of Insurance, local District Attorneys, and the California Highway Patrol – Passed by Asm. Insurance Committee on a 14-0 vote; will be heard next by the Asm. Appropriations Committee.
Health-related
AB 810 (Gibson): Requires the State Department of Public Health to convene a working group to evaluate ways to provide organ transplants to uninsured or undocumented residents of the state who are ineligible for organ transplants due to financial hardship – Passed by Asm. Health Committee on an 11-1 vote; will be heard next by the Asm. Appropriations Committee.
AB 1088 (Wood): Provides that an aged, blind, or disabled individual who would otherwise be eligible for Medi-Cal benefits, as specified, would be eligible for Medi-Cal without a share of cost if their income and resources otherwise meet eligibility requirements – Passed by Asm. Health Committee on a 15-0 vote; will be heard next by the Asm. Appropriations Committee.
AB 1174 (Wood): Requires a health care service plan or insurer to notify the Department of Managed Health Care or California Department of Insurance before the expiration or termination of an anesthesia services contract – Passed by Asm. Health Committee on an 11-0 vote; will be heard next by the Asm. Appropriations Committee.
AB 1309 (Bauer-Kahan): Requires a health care service plan and a health insurer, for policy years beginning on or after January 1, 2020, to provide a special enrollment period to allow individuals to enroll in individual health benefit plans through the Exchange from December 16 of the preceding calendar year, to January 31 of the benefit year – Passed by Asm. Health Committee on a 12-1 vote; will be heard next by the Asm. Appropriations Committee.
SB 207 (Hurtado): Includes asthma preventive services as a covered benefit under the Medi-Cal program and requires the State Department of Health Care Services, in consultation with external stakeholders, to approve two accrediting bodies with expertise in asthma to review and approve training curricula for asthma preventive services providers – Passed by Sen. Health Committee on an 8-0 vote; will be heard next by the Sen. Appropriations Committee.
SB 260 (Hurtado): Requires Covered California to enroll an individual or individuals who are determined ineligible for Medi-Cal in the lowest cost silver plan upon receipt of information from a county unless Covered California has information from the county, Department of Health Care Services, or a Medi-Cal managed care plan, that enables Covered California to enroll the individual with the individual’s previous managed care plan within specified timeframes – Passed by Sen. Health Committee on an 8-0 vote; will be heard next by the Sen. Appropriations Committee.
SB 343 (Pan): Eliminates provisions in health insurance rate filing requirements that permit Kaiser Permanente health plans and insurers to report medical trend assumptions in a different manner than other health plans – Passed by Sen. Health Committee on a 7-1 vote; will be heard next by the Sen. Appropriations Committee.
SB 361 (Mitchell): Requires the Department of Health Care Services to require Medi-Cal managed care plans administering the Health Homes Program to take specific steps to reaching the goal of one-third of program participants are individuals who experience chronic homelessness – Passed by Sen. Health Committee on an 8-0 vote; will be heard next by the Sen. Appropriations Committee.
Tax-related
AB 1296 (Gonzalez): Establishes the Tax Recovery in the Underground Economy Criminal Enforcement Program in the Department of Justice to combat underground economic activities through a multi-agency collaboration to, among other things, pool resources, collaborate and share data, prosecute violations, and recover state revenue lost to the underground economy – Passed by Asm. Public Safety Committee on an 8-0 vote; will be heard next by the Asm. Revenue & Taxation Committee on 4/22.
SB 468 (Jackson): Repeals all tax expenditures, as defined, on December 31, 2023, not including any tax expenditures under the Personal Income Tax Law, and would require, if a tax expenditure is amended to remove or extend the repeal date, the act doing so to include specified information related to the efficacy of the tax expenditure – Referred to Sen. Governance & Finance Committee; no hearing set yet.
