Governor’s $24 Billion Plan for Wildfires, PG&E

Governor Gavin Newsom last week proposed creating a $21 billion fund to pay for future wildfire costs. The costs of the fund will be split evenly between ratepayers and shareholders of PG&E and California’s two other major utilities. The three companies must also spend a combined $3 billion on wildfire safety measures to become eligible for the Governor’s new fund, putting the total amount going toward wildfire mitigation and response costs at $24 billion. 

The Governor’s insurance fund will pay claims to victims of future wildfires that are caused by faulty utility equipment. Half the money would come from PG&E, Edison, and SDG&E’s shareholders. The other half would come from their ratepayers through an existing $2.50 surcharge included on customers’ current monthly rates, which they have been paying since the early 2000s. The Governor’s plan would extend that surcharge for 15 years.

The plan intends to help victims quickly and effectively during future wildfires by having money already set aside while being sure that this plan does not increase the burden on ratepayers. The plan also seeks to help PG&E recover financially after having to declare bankruptcy in January due to liabilities for the catastrophic wildfires in 2017 and 2018. 

This approach seeks to enable PG&E to secure the estimated $30 billion they need to settle claims for those victims, as well as provide increased certainty to the three large investor-owned utilities as to whether they’ll be able to continue providing services to their ratepayers. PG&E has until June 30, 2020 to assemble the financing and get a bankruptcy plan approved in court.

However, Newsom’s plan does have a wrinkle to it: Utilities can choose not to create the $21 billion insurance fund and instead opt for a $10.5 billion “liquidity fund” financed solely from the $2.50-a-month charge on existing utility bills. If the companies choose that option, which is subject to review by the Public Utilities Commission, they would have to reimburse it dollar for dollar. Depending on the PUC’s determination, that cost could be put on ratepayers if the companies behaved prudently, or from their shareholders if they did not. 

Newsom did not give lawmakers discretion on which fund to choose, leaving the decision up to the utility companies. However, Newsom’s staff still expects the utilities will choose the larger insurance fund because it provides more security.

The Governor is working with the Legislature to incorporate his ambitious new wildfire insurance fund into a package of bills which will also address other issues regarding wildfires. The proposals are as sweeping and politically combustible as California fires themselves. Newsom wants to clearly define what constitutes reasonable and safe utility operations, flipping the standard of proof to a presumption of innocence in determining how to compensate victims; squeeze utilities to pay more for safety measures; and even tie executive compensation to companies’ safety records. 

This wildfire plan comes as part of a larger wildfire initiative by Governor Newsom, including releasing a status report on the issue. Newsom wants the legislation passed by July 12 before the summer recess, signaling that language will be going into a budget trailer bill to prepare for potential wildfires this year.

Threat of Disasters Spur Mitigation Fund Proposal

Senator Susan Rubio (D-Baldwin Park), Chair of the Senate Insurance Committee, amended SB 292 on June 17 to create the Prepared California Disaster Mitigation Fund as an effort to address the increasing threat of disasters. This bill was a gut and amend effort presented as a launching point, as the author’s office and staff of the Senate Insurance Committee have indicated their willingness to work with stakeholders on every section of the proposal.

The Fund would be capitalized by assessments against residential property ($12 annually), personal and commercial auto policies ($6 per vehicle annually), and a one percent assessment against all commercial policies covering physical damage or business interruption. The bill identifies allocation levels for the Fund of at least 20 percent going to the California Earthquake Authority (CEA) for the brace-and-bolt program, at least 20 percent to homeowners for fire-related disaster mitigation, 20 percent to the Department of Forestry and Fire Protection (local assistance grant programs for fire protection), 20 percent to the Department of Water Resources (for various flood control purposes), and five percent toward operating expenses. Theoretically, all the money could be spent in these categories.

Additionally, the bill charges to the Mitigation Fund Board to report their recommendations to the Legislature for model homeowners’ insurance discounts based on the risk mitigation measures that the board has determined to reduce loss based on its studies conducted pursuant to this division.

This bill is very much a work in progress and has been pulled from being heard in the Assembly Insurance Committee in order to work with stakeholders to develop a functional proposal. At this time, it is not expected to be heard this year.

Anti-Arbitration Proposal Keeps Moving in Senate

An anti-arbitration bill identified by the California Chamber of Commerce as a job killer passed through the first Senate committee to consider it this week. The Senate Labor, Public Employment and Retirement Committee approved AB 51 (Gonzalez), which prohibits arbitration of labor and employment claims as a condition of employment.

AB 51 is a job killer due to the significantly increased costs employers will face as a result of more litigation and the expense of delayed dispute resolutions. This bill also proposes to add a new private right of action under the Fair Employment and Housing Act (FEHA) and exposes employers to criminal liability for any violation.

In testifying against AB 51, CalChamber Executive Vice President Jennifer Barrera emphasized to Senate committee members the bill will be challenged in court and struck down. Last year, Governor Edmund G. Brown Jr. vetoed a virtually identical bill, AB 3080 (Gonzalez), citing his recognition that the bill “plainly violates federal law.” Both the California Court of Appeal and the U.S. Supreme Court have specifically held that state legislation trying to ban arbitration agreements is preempted by federal law, the Federal Arbitration Act. Numerous opinions by the U.S. Supreme Court and the California Supreme Court over the last decade have consistently held that any state law that interferes with, discriminates against, or limits the use of arbitration is preempted by federal law.

Neither employers nor employees will benefit from the delays and uncertainty AB 51 will cause. If the use of arbitration is limited, the remaining options for employees are a hearing before the Labor Commissioner (an office that lacks funding or resources for timely responses) and the overworked court system.

Countering the notion that employees can fare better in court, a state Department of Industrial Relations review of 1,500 settlement agreements found that the plaintiffs’ attorneys had failed to protect employees or were of only marginal assistance in a majority of cases.

Update on 2019 Legal Reform Legislation: What Remains?

Now that the house of origin deadline has passed, and we are basically at the mid-point in the California Legislative Session, we can take a look at pending legislation with particular attention to the bills that will continue along the legislative process in the second house. The focus of this article is on legal reform legislation. The following, as provided by Chris Micheli, are the major legal reform bills of particular interest to the California business community:

AB 418 (Kalra) – Union representative privilege

This bill would establish a privilege between a union agent, as defined, and a represented employee or represented former employee to refuse to disclose any confidential communication between the employee or former employee and the union agent made while the union agent was acting in the union agent’s representative capacity. Status: Pending in Senate policy committee.

AB 749 (Stone) – No-rehire provisions

This bill would prohibit an agreement to settle an employment dispute from containing a provision that prohibits, prevents, or otherwise restricts a settling party who is an aggrieved person, as defined, from working for the employer against which the aggrieved person has filed a claim or any parent company, subsidiary, division, affiliate, or contractor of the employer. Status: Pending in the Senate policy committee.

AB 1286 (Muratsuchi) – Shared mobility devices

This bill would require a shared mobility service provider, as defined, to enter into an agreement with, or obtain a permit from, the city or county with jurisdiction over the area of use. The bill would require the provider to maintain a specified amount of commercial general liability insurance and would prohibit the provider from including specified provisions in a user agreement before distributing a shared mobility device within that jurisdiction. The bill would define shared mobility device to mean an electrically motorized board, motorized scooter, electric bicycle, bicycle, or other similar personal transportation devices, except as provided. Status: Pending in Senate policy committee.

AB 1607 (Boerner Horvath) – Gender discrimination notification

This bill would require a city, county, or city and county that issues local business licenses to provide written notification in English, Spanish, Chinese, Tagalog, Vietnamese, and Korean of the above provisions to the licensee at the time the business license is issued. The bill would require the Department of Consumer Affairs to develop, on or before January 1, 2020, written notification of the above provisions in English, Spanish, Chinese, Tagalog, Vietnamese, and Korean and would require the notification to be available for download from the department’s internet website. The bill would authorize a city, county, or city and county to provide the department’s written notification to a business and to increase the fee for a business license to cover the reasonable cost of providing the notice. The bill would also require the department to provide the pamphlet and other informational materials in English, Spanish, Chinese, Tagalog, Vietnamese, and Korean. Status: Pending in Senate policy committee.

SB 41 (Hertzberg) – Calculating damages

This bill would prohibit the estimation, measure, or calculation of past, present, or future damages for lost earnings or impaired earning capacity resulting from personal injury or wrongful death from being reduced based on race, ethnicity, or gender. Status: Pending on Assembly Floor.

SB 218 (Bradford) – Local FEHA enforcement

This bill would authorize the legislative body of a local government to enact their own anti-discrimination laws relating to employment, including establishing remedies and penalties for violations. The bill would authorize local governments to create a local agency to enforce these local anti-discrimination laws. Status: Pending in Assembly policy committee.

SB 707 (Wieckowski) – Arbitration

The bill would require the court to impose a monetary sanction on the drafting party who materially breaches an arbitration agreement, and would authorize the court to impose other sanctions, as specified. If the employee or consumer compels arbitration, the bill would require the arbitrator to impose appropriate sanctions on the drafting party, including monetary sanctions, issue sanctions, evidence sanctions, or terminating sanctions. Status: Pending in Assembly policy committee.

SB 749 (Durazo) – Public records and trade secrets

This bill would provide that records relating to wages, benefits, working hours, and other employment terms and conditions of employees working for a private industry employer pursuant to a contract with a state or local agency are public records and shall not be deemed to be trade secrets under the act if the records are prepared, owned, used, or retained by a state or local agency. The bill would also provide that records of compliance with local, state, or federal domestic content requirements and records of a private industry employer’s compliance with job creation, job quality, or job retention obligations contained in a contract or agreement with a state or local agency are public records and shall not be deemed trade secrets under the act if the records are prepared, owned, used, or retained by a state or local agency. Status: Pending in Assembly policy committee.

Legislative Update

Environment-related

AB 756 (C. Garcia) Authorizes the State Water Resources Control Board to order one or more public water systems to monitor for perfluoroalkyl and polyfluoroalkyl substances and establishes a separate customer notification process as a result of any confirmed detection. Recent action: Passed Senate Environmental Quality Committee, 6-0. Referred to Senate Appropriations Committee.

AB 1788 (Bloom) Expand the prohibition on the use of second-generation anticoagulant rodenticides to be in effect statewide, prohibit the use of first-generation anticoagulant rodenticides on state-owned lands, and make specified exemptions from the prohibition for use by a governmental agency for public health activities, and agricultural activities, such as a warehouse storing food, or breweries and wineries. Passed Senate Environmental Quality Committee, 4-0. Referred to Senate Appropriations Committee.

Labor-related

AB 1677 (Weber) Provides that an employer of customer service employees in a call center that intends to relocate from this state to a foreign country shall notify the Labor Commissioner, pay penalties for failure to do so, and forfeit state grants, guaranteed loans, and tax credits for five years. Recent action: Set for hearing in Senate Labor, Public Employment & Retirement Committee for June 26.

AB 1804 (Labor & Employment Committee) Removes the requirement that an employer report by email to the Division of Occupational Safety and Health a serious occupational injury, illness, or death and instead requires the report to be made by telephone or through an online mechanism. Recent action: Passed Senate Labor, Public Employment & Retirement Committee, 5-0. Referred to Senate Appropriations Committee.

AB 1805 (Labor & Employment Committee) Revises the definition of a "serious injury or illness" occurring in the workplace or in connection with employment to remove the 24-hour minimum time requirement for inpatient hospitalization, for other than medical observation or diagnostic testing, and to include an employee suffering "an amputation," or "the loss of an eye," among other things, and creates uniformity in the Labor Code. Recent action: Passed Senate Labor, Public Employment & Retirement Committee, 5-0. Referred to Senate Appropriations Committee.

SB 142 (Wiener) Expands worker protections for lactation accommodation requests and requires the California Building Standards Commission to develop and propose building standards for the installation of lactation space for employees in new buildings. CalChamber has expressed opposition to this bill as it wrongfully considers lactation as a break similar to meal or rest that is predictable to schedule. Recent action: Dual referral, set for hearing in Assembly Labor and Employment Committee for June 26, set for hearing in Assembly Business and Professions Committee for July 2.

SB 530 (Galgiani) – Instructs the Division of Labor Standards Enforcement to develop an industry-specific harassment and discrimination prevention policy for the construction industry. Amended June 18 to clarify the requirement for sexual harassment prevention training applicable to the construction industry where there is a multiemployer collective bargaining agreement in place. Recent action: Set for hearing in Assembly Labor and Employment Committee for June 26.

Insurance-related

SB 290 (Dodd) Authorizes the Governor to purchase insurance, or other related risk-transfer products, for the State of California to help mitigate against costs incurred in response to a natural disaster. Recent action: Set for hearing in Assembly Insurance Committee for June 26.

Utilities-related

AB 523 (Irwin) Prohibits a telephone or telegraph corporation from making available to any other person or corporation, a noncommercial subscriber's customer proprietary network information, including geolocation information, without first obtaining the noncommercial subscriber's written consent. Recent action: Set for hearing in Senate Energy, Utilities and Communications Committee for July 2.

AB 1132 (Gabriel) Prohibits the falsification of a state or local agency’s caller identification information with the intent to mislead, cause harm, deceive, or defraud the recipient of the call. Recent action: Passed Senate Energy, Utilities and Communications Committee, 13-0. Referred to Senate Judiciary Committee to be heard on July 2.

SB 670 (McGuire) Requires telecommunications service providers to submit a specified outage notification to the Office of Emergency Services whenever a community isolation outage occurs that limits the ability to make 911 calls or receive emergency notifications. Recent action: Referred to Assembly Governmental Organization Committee, hearing not set.

Business-related

SB 469 (Dodd) Authorizes the California Horse Racing Board to suspend a license to conduct a horse racing meeting when necessary to protect the health and safety of horses and riders. Recent action: Passed Assembly Appropriations Committee, 17-0. Referred to Assembly Floor.

Health-related

SB 276 (Pan) Requires the Department of Public Health (DPH) to annually review immunization reports from all schools and institutions to identify medical exemptions subject to review; requires a clinically trained DPH staff member to review exemptions from schools or institutions with an immunization rate of less than 95% or physicians and surgeons who submit five or more medical exemptions in a calendar year; permits DPH to deny or revoke a medical exemption determined to be inappropriate or invalid; establishes an appeals processes and a standardized exemption form. Recent action: Passed Assembly Health Committee, 9-2. Referred to Assembly Appropriations Committee.

Privacy-related

AB 1130 (Levine) Revises the definition of personal information to add specified unique biometric data and tax identification numbers, passport numbers, military identification numbers, and unique identification numbers issued on a government document in addition to those for driver’s licenses and California identification cards. Recent action: Set for hearing in Senate Judiciary Committee for July 2.

AB 1146 (Berman) Establishes an additional exemption from the California Consumer Privacy Act of 2018 for vehicle and ownership information retained or shared pursuant to or in anticipation of a vehicle repair relating to warranty work or a recall conducted pursuant to federal law, except with respect to a consumer's right to access their personal information (PI), to know what PI has been collected or sold about them, and to bring a private right of action in the case of a data breach. Recent action: Referred to Senate Judiciary Committee, no hearing date set.