“ABC Test” Bill Moves Pass Assembly Appropriations Committee

AB 5 (Gonzalez), the labor-backed bill to put the Dynamex decision in statute, cleared the Assembly Appropriations Committee this week and will soon be heard by the full Assembly. Amendments were added to the bill to provide for a general exception for licensed professionals such as accountants, dentists, architects, and others so long as they meet certain conditions, an exemption for hair and nail salons and language specifically applying Dynamex to unemployment insurance decisions, thus extending the decision beyond wage orders. The bill already contained specific exemptions for insurance agents and brokers, emergency room doctors, direct sellers like Mary Kay consultants and stockbrokers. 

Negotiations on additional amends and exemptions are ongoing. It is expected the final language for the bill will be completed when the bill is heard in the Senate Labor and Employment Committee in late June or early July. 

Independent truckers and Teamsters are reportedly negotiating provisions for the trucking industry. The California Chamber of Commerce is working on a general liberalization of the strict ABC Test to provide businesses more flexibility. There is also now a coalition of gig economy workers consisting of rideshare workers, dietary consultants, engineers, lawyers, therapists and others who have advanced degrees, are licensed by the state, or simply want to remain independent contractors, who are seeking additional exemptions. 

The recent court Ninth Circuit Court applying Dynamex retroactively is sure to produce additional concerns relative to this bill amongst Senators. The Chair of the Senate policy committee with jurisdiction over this issue is a small business person with personal experience with independent contractor issues, and there are a number of State Senators with moderate leaning that could force additional amendments to the bill including, but not limited to, language which would apply the Dynamex decision prospectively only. 

Governor Partners with Locals in Effort to Tamper Prescription Drug Costs

Last week, Governor Gavin Newsom joined San Francisco Mayor London Breed and officials from Santa Clara and Alameda counties to announce the three Bay Area counties, among the largest public purchasers of prescription drugs in California, will partner with the state to use their combined market power in negotiating with drug companies to lower the cost of prescription drugs. Last month, Los Angeles County – the state’s largest local purchaser of drugs – joined in the state’s efforts.  

The announcement was part of the Governor’s “California for All” Health Care Tour. A week after he released his revised budget that advances these priorities, Governor Newsom is taking his proposals on the road as part of the statewide tour launched Tuesday in Sacramento. The Governor will travel across the state this week hosting events highlighting how the health care initiatives in his budget proposal would help families meet their health care challenges. Each event will focus on one of the proposals in Governor Newsom’s health care package, and the tour will host events in San Francisco, San Diego, Los Angeles, and Sacramento. 

“Californians are coming together to use their market power and their moral power to demand fairer prices for prescription drugs,” said Governor Newsom. “Now we are able to go to the table with massive capacity to leverage the negotiation, drive down costs, put more money in your pocketbooks and make a difference in peoples’ lives.” 

Recent data shows health care and prescription drugs are chief among those concerns for California families. Those buying on the individual market will see an average nine percent rise in health care costs this year, according to Covered California. American families have seen their prescription drug costs nearly doubled since the year 2000, according to the Kaiser Family Foundation, and prescription drug pricing is one of the largest drivers of rising health care costs. In January, a Reuters report found 30 drug manufacturers that did business with the State of California planned to raise their prices in January.

Bill on Expanding Penalties for Personal Data Stalls in Fiscal Committee

On Thursday, May 16, amidst a slew of bills, one that would have expanded the path for compensation and sue companies over handling of personal data stalled in Senate Appropriations Committee as it was held on the Suspense File. SB 561 (Jackson) would have expanded a consumer’s rights to bring a civil action for damages to apply to other violations under the California Consumer Privacy Act of 2018 (CCPA).

Beginning in 2020, the CCPA grants a consumer various rights with regard to personal information relating to that consumer that is held by a business, including the right to know what personal information is collected by a business and to have information held by that business deleted. Under this law, a consumer whose nonencrypted or nonredacted personal information is subject to unauthorized access and exfiltration, theft, or disclosure as a result of the business’s failure to maintain reasonable security procedures will be able to bring a civil action for various damages.

In addition to expanding the rights for consumers to bring private action, SB 561 would have prohibited the ability to cure any alleged violation within 30 days after being notified of alleged noncompliance with the act. Businesses would have also been restricted from seeking direct guidance from the Attorney General’s office on how to comply with specific alleged violations.

Staff of the Senate Appropriations Committee identified concerns in the bill’s analysis that “if alleged violations of the California Consumer Privacy Act of 2018 that would not have been litigated by the Attorney General led to the filing of four or more new large cases, eighteen or more smaller cases, or a few complex cases that took longer than six days to adjudicate, the cost pressures to the court would surpass the Suspense File threshold…[and] could result in delayed court services.”

Bill on California Earthquake Authority Expansion Tabled to 2020

A bill that would place a tax on most residential and commercial insurance policyholders in the aftermath of a catastrophic earthquake met a roadblock this week in the Senate Appropriation Committee. SB 254 (Hertzberg) proposed to make a number of unprecedented changes to the Insurance Code which would have adversely affected both residential and commercial policyholders of non-CEA insurers.

The bill, sponsored by the California Earthquake Authority (CEA), sought to breach the walls separating CEA and non-CEA insurers and policyholders, create cross-subsidies, result in multiple assessments on policyholders, including most commercial insurance, impose assessments on lines of insurance never previously assessed like non-admitted insurers and impose assessments on surplus line brokers. The goal of the bill from the CEA standpoint was to reduce its cost for reinsurance, take a portion of those savings to expand their Brace and Bolt program, and to strengthen their financial ability to handle multiple events.

After an over two-hour hearing in the Senate Insurance Committee where there was substantial opposition from non-CEA insurers, large and small, independent agents and brokers, surplus line brokers and reinsurers, the bill limped out of committee with several courtesy votes to allow the author the opportunity to continue to work with opponents on a compromise. Stakeholders developed a possible compromise that would have applied the bill only to CEA member companies and their policyholders. However, the compromise ran into issues as the author had made commitments to members of the Insurance Committee, and the fact the bill was tagged as a tax increase.

As a result, the Chairman of the Senate Appropriations Committee decided to defer action on the legislation and made it a two-year bill. This means the bill will be eligible to move forward again in 2020, and it will allow the author and the sponsor to do further work on the legislation to reach a compromise and avoid opposition. The author and sponsor will likely want to take the opportunity to develop modifications to remove the “tax increase” provisions, which requires a two-thirds vote and is politically difficult even in this one-party controlled Legislature.

Legislative Update

Privacy-related

AB 25 (Chau) – Redefines the term “consumer” in the California Consumer Protection Act to exclude a natural person whose personal information is collected by a business in the course of a person’s application for employment or within the scope of the person’s employment, or if the person is a contractor or agent of the employer if the person’s personal information is collected and used within the context of the person’s role as a job applicant employee, contractor or agent. Recent action: Consent Calendar. Ordered to third reading; Current location: Assembly Floor.

AB 873 (Irwin) – Redefines “deidentified” for purposes of the California Consumer Privacy Act to mean information that does not identify, or is not reasonably linkable to a particular consumer, provided the business makes no attempt to re-identify the information and takes reasonable measures to ensure the data is not re-identified. Recent action: Read second time. Ordered to third reading; Current location: Assembly Floor.

AB 981 (Daly) – Places a number of concepts contained within the California Consumer Privacy Act of 2018 (CCPA) into the Insurance Information and Privacy Protection Act (IIPPA), and eliminates a consumer’s right to request a business to delete or not sell the consumer’s personal information under the CCPA if it is necessary to retain or share the consumer’s personal information to complete an insurance transaction requested by the consumer. Recent action: Read second time. Ordered to Consent Calendar; Current location: Consent Calendar.

AB 1130 (Levine) – Expands the definition of personal information as defined in California’s Data Breach Notification Law as it applies to both public agencies and businesses to include government-issued identification numbers and unique biometric data generated from measurements or technical analysis of human body characteristics, such as a fingerprint, retina, or iris image or other unique physical representation or digital representation of biometric data. Recent action: Passed off the Assembly Appropriations Suspense File; Current location: Assembly Floor.

AB 1202 (Chau) – Requires a data broker to provide consumers the right to opt-out of the sale of their personal information (PI) and any other rights afforded by the California Consumer Privacy Act of 2018. Recent action: Passed off the Assembly Appropriations Suspense File; Current location: Assembly Floor.

AB 1416 (Cooley) – Specifies that the obligations imposed on businesses by the California Consumer Privacy Act of 2018 (CCPA) shall not restrict a business's ability to comply with any rules or regulations adopted pursuant to and in furtherance of state or federal laws; provides that the obligations imposed on businesses by the CCPA shall not restrict a business's ability to provide a consumer's personal information (PI) to a government agency solely for the purposes of carrying out a government program. Recent action: Read second time; Current location: Assembly Floor.

SB 561 (Jackson) – Expands a consumer’s ability to bring a civil action for violations of rights granted by the California Consumer Privacy Act of 2018 and would remove the ability of a business to cure an alleged violation of the act within 30 days to remain in compliance. Recent action: Hold in committee; Current location: Senate Appropriations Suspense File.

Cannabis-related

AB 1356 (Ting) – Requires jurisdictions in which more than 50% of the electorate voted to approve the legalization of adult-use cannabis to issue a minimum number of local licenses to authorize retail cannabis commercial activity and allows a jurisdiction to limit eligibility for licenses to only medicinal licensees. Recent action: Passed off the Assembly Appropriations Suspense File; Current location: Assembly Floor.

AB 1417 (Rubio) – Strengthens the disclosure requirements imposed on advertisements of cannabis products and expands liability for assisting a person in engaging in unlicensed commercial cannabis activity. Recent action: Passed off the Assembly Appropriations Suspense File; Next location: Pending referral to Assembly Floor.

SB 34 (Wiener) – Allows cannabis licensee holders to donate medicinal cannabis and medicinal cannabis products to qualified patients, and allows such donations to be exempt from the cultivation tax and the use tax. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

SB 51 (Hertzberg) – Authorizes the creation of cannabis limited charter banks and credit unions and authorizes the use of special purpose checks issued by those institutions for specified purposes. Creates costs to the Department of Business Oversight (DBO) for the chartering of new banks and credit unions, costing approximately $2 million per year. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

SB 67 (McGuire) – Extends a temporary cannabis license issued by the California Department of Food and Agriculture if the temporary license holder submitted an application and fees for an annual license before the temporary license’s expiration date. Recent action: Referred to committees on Agriculture and Business & Professions; Current location: Assembly Agriculture.

SB 185 (McGuire) – Requires, no later than January 1, 2021, the Department of Food and Agriculture, in conjunction with the Department of Public Health, to establish a certification program for manufactured cannabis products comparable to the National Organic Program and the California Organic Food and Farming Act. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

Insurance-related

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. Recent action: Passed off the Assembly Appropriations Suspense File; Next location: Pending referral to Assembly Floor.

SB 190 (Dodd) – Requires the State Fire Marshal to develop a model defensible space program and develop a Wildland-Urban Interface Fire Safety Building Standards Compliance training manual. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

SB 209 (Dodd) – Establishes the California Wildfire Warning Center and requires the Center to have various responsibilities relating to fire-threat weather conditions, including a statewide fire weather forecasting, monitoring, and threat assessment system. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

SB 290 (Dodd) – Authorizes, upon appropriation by the Legislature, the Governor to purchase insurance, reinsurance, insurance-linked securities, or other related alternative risk-transfer products for the State of California to help mitigate against costs incurred by the state in response to a natural disaster, including, but not limited to, an earthquake, wildfire, or flood. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

SB 254 (Hertzberg) – Grants the governing board of the California Earthquake Authority the contingent power to impose a tax on most types of property and casualty insurance for consumers with policies covering risks in high earthquake risk zones, contingent on losses from one or more catastrophic earthquakes depleting the CEA of all other claims-paying resources, and establishes a mechanism that would allow the CEA to continue to provide coverage after a subsequent earthquake when its primary claims-paying capacity is depleted. Recent action: Hold in committee; Current location: Senate Appropriations Suspense File.

SB 534 (Bradford) – Requires each admitted insurer with premiums written equal to or in excess of $100,000,000 to submit to the Insurance Commissioner a report on its minority, women, LGBT, veteran, and disabled veteran-owned business procurement efforts. Costs are minor, likely less than $50,000 to revise California Department of Insurance’s Conflict of Interest Code regulations in order to codify the Insurance Diversity Task Force. Recent action: Read second time. Ordered to third reading; Current location: Senate floor.

SB 570 (Rubio) – Makes several changes to the California Low Cost Automobile Insurance Program including deleting obsolete requirements and deleting the prohibition for an insured under the program from purchasing or maintaining automobile liability insurance coverage other than a low-cost policy for any additional vehicles in the insured’s household, and extends the repeal date to January 1, 2025. Recent action: Read second time. Ordered to third reading; Current location: Senate floor.

Tax-related

AB 37 (Jones-Sawyer) – Specifies, for tax years 2019 through 2023, that the federal disallowance of tax expenditures related to the illegal sale of drugs does not apply under state Personal Income Tax Law for businesses engaged in commercial cannabis activities. Recent action: Passed off the Assembly Appropriations Suspense File; Next location: Pending referral to Assembly Floor.

AB 176 (Cervantes) – Requires the California Alternative Energy and Advanced Transportation Financing Authority, by July 1, 2020, to develop a report that formally responds to a Legislative Analyst’s Office report and must address redundant sales and use tax policies for recommendations on program changes. Recent action: Passed off the Assembly Appropriations Suspense File; Next location: Pending referral to Assembly Floor.

AB 286 (Bonta) – Temporarily reduces, from 15% to 11%, the excise tax on sales of cannabis and cannabis products and temporarily suspends the cannabis cultivation tax. Recent action: Hold in committee; Current location: Assembly Appropriations Suspense File.

SB 162 (Galgiani) – Extends the California Alternative Energy and Advanced Transportation Financing Authority’s Sales and Use Tax Exclusion Program until January 1, 2030. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

SB 468 (Jackson) – Establishes the California Tax Expenditure Review Board to determine the schedule for a comprehensive assessment of major tax expenditures programs to be conducted by the Legislative Analyst’s Office. Costs for the LAO could reach $1 million annually, minor costs for the Board. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

Labor-related

AB 5 (Gonzalez) – Codifies the decision of the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (Dynamex) that presumes a worker is an employee unless a hiring entity satisfies a three-factor test (ABC test), applies the ABC test to the Labor Code and Unemployment Insurance Code for instances when a definition of employee is not otherwise provided. Recent action: Passed off the Assembly Appropriations Suspense File; Next location: Pending referral to Assembly Floor.

AB 171 (Gonzalez) – Extends an existing law that prohibits an employer from discharging or in any manner discriminating or retaliating against an employee because of the employee’s status as a victim of domestic violence, sexual assault, or stalking so that the protection also extends to employees who are victims of sexual harassment. Recent action: Passed off the Assembly Appropriations Suspense File; Current location: Assembly Floor.

AB 648 (Nazarian) – Prohibits health care plans, insurers, and employers from discriminating against persons who decline to participate in a wellness program and ensures that only essential health information is collected. Recent action: Made a two-year bill; Current location: Assembly Appropriations Suspense File.

AB 1224 (Gray) – Expands paid family leave (PFL) benefits by allowing two six-week PFL claims per year. Recent action: In committee: Held under submission; Current location: Assembly Appropriations Suspense File.

AB 1296 (Gonzalez) – Establishes the Tax Recovery in the Underground Economy Criminal Enforcement (TRUE) Program in the Department of Justice (DOJ) to combat underground economic activities. Recent action: Passed off the Assembly Appropriations Suspense File; Next location: Pending referral to Assembly Floor.

SB 135 (Jackson) – Reduces the employee threshold for the California Family Rights Act (CFRA) from 50 or more employees down to five or more, repeals the New Parent Leave Act (enacted in 2017) and instead expands the scope of CFRA in order to provide leave rights to more employees, expands the list of individuals for which a worker can take time off under CFRA to include child-in-laws, grandparents, grandchildren, siblings, domestic partners, parent-in-laws, or a designated person, reduces the time threshold an employee must work before being eligible for leave under CFRA from 1,250 hours in a 12-month period to 180 days of service with the employer, and expands the scope of PFL to include time off to care for a seriously ill designated person or child-in-law. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

SB 171 (Jackson) – Requires large employers, with 100 or more employees and who are required to file an annual Employer Information Report, to annually report pay and job title information broken down by gender, race, and ethnicity to the Department of Fair Employment and Housing. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

Health-related

AB 824 (Wood) – Restricts so-called “pay-for-delay” agreements among pharmaceuticals, by presuming as anticompetitive agreements entered into by brand name/biologic manufacturers and generic/biosimilar drug manufacturers that resolve or settle a patent infringement claim where there is a transfer of value coupled with an agreement to limit or forego research, development, manufacturing, marketing, or sales of the generic/biosimilar product. Recent action: Passed off the Assembly Appropriations Suspense File; Current location: Assembly Floor.

SB 38 (Hill) – Prohibits a tobacco retailer, or any of the retailer’s agents or employees, from selling, offering for sale, or possessing with the intent to sell or offer for sale, a flavored tobacco product, authorizes an enforcing agency to assess specified civil penalties, and does not preempt or prohibit adoption of a local standard that imposes greater restrictions on the access to tobacco products. Recent action: Passed off the Senate Appropriations Suspense File; Next location: Pending referral to Senate Floor.

SB 537 (Hill) – Requires medical provider networks to list all medical providers on a public roster and prohibit MPNs from altering medical treatment plans and medical billing codes, and prohibits any contract between a medical provider and a contracting agent, employer or insurance carrier that is less than the applicable Medicare fee schedule. Recent action: Passed off the Senate Appropriations Suspense File; Current location: Senate Floor.

Building-related

SB 142 (Wiener) – Requires the California Building Standards Commission to develop and propose for adoption building standards for the installation of lactation space for employees. Costs include $261,000 for the California Building Standards Commission, and $183,000 in first-year costs and annual recurring costs of $171,000 for Department of Industrial Relations. Recent action: Passed off the Assembly Appropriations Suspense File; Current location: Assembly Floor.