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Elections Have Consequences Department….

by D. Gregory Valenza | |

No, not *that* election. That election is not even over yet.  And if you don’t believe me, just ask President Gore.  If the current media predictions hold, however, there will be many consequences of the presidential election, which will be the subject of many future articles, seminars, and posts I’m sure.

But while we’re on the subject of the presidential election, one immediate caveat for the workplace merits attention: There are some politicians, celebrities, pundits, etc. calling for “lists” and naming and shaming of supporters of the current and possibly soon-to-be former President. (e.g., here, here).  Whatever you may think of that idea personally, there is a workplace law concern to consider. In California, employers that take negative action against employees because of their political views violate the Labor Code. California employers should be careful what they woke for.

Anyway, the California election, which is concluded, had some consequences for California employers.

Privacy Act Initiative

In a nutshell, California’s existing Consumer Privacy Act requires businesses of a certain size, or which meet other criteria, to implement procedures to safeguard consumer information, disclose to consumers what information they collect, and allow consumers to control what these businesses do with the information.  We wrote an article about what the Act is, and how it affects employers here.

In the November 3 election, the voters passed Proposition 24 (here), which the authors believe will strengthen the CCPA. You can see the initiative’s changes to existing law as redlines / italics and strikeouts in the linked initiative above.

Fortunately for covered businesses, Proposition 24 extends the employer personnel records exemption until January 1, 2023. But when this law takes effect, it will change how employers handle the collection, storage, and, most significantly, sharing of a variety of applicant, employee, and personnel information. Of course, the other provisions of the law will take effect sooner, and the existing CCPA already is in effect with respect to consumer information.  So, all covered businesses should be reviewing Proposition 24 and preparing to comply with the revised provisions.  We will be covering the employment-related provisions in greater detail in the future.

Independent Contractors / App-Based Drivers

Proposition 22 (here) exempts qualifying “app-based drivers” from independent contractor / employee analysis applicable to other California employers. That is, the ABC Test *and* the Borello test, as contained in AB 5 and now AB 2257, no longer will apply to Uber, Lyft, Door Dash, etc., provided they comply with the requirements contained in Prop. 22.  And the requirements of Prop. 22 are no joke.  The initiative requires minimum income levels for the drivers, expense reimbursements, healthcare coverage or subsidies, and more. However, the new initiative says, unequivocally, that these drivers are, once and for all, independent contractors, if the companies involve pay the drivers accordingly and otherwise follow the new law.

Some of you may be thinking: Can this be done in other industries for other independent contractors who did not obtain exemptions in AB 2257? (Hello, court reporters, for example.)  What about initiatives to stop PAGA abuse, to allow easier 4/10 schedules without daily overtime, overturn bad meal period case law, getting rid of the patchwork of local ordinances that make it nearly impossible to operate a statewide business, etc.  Sure. All it takes is an appealing argument to the voters, and a huge amount of money.

And Speaking of Local Ordinances…

The San Francisco voters passed an ordinance entitled the “Overpaid Executive Gross Receipts Tax.”  The taxation will begin effective January 1, 2022.  You can read the ordinance here.

San Francisco already imposes a gross receipts tax, as well as a payroll tax, on businesses operating within San Francisco (in addition to other taxes).  This new provision will impose an additional tax, depending on a “ratio.” The ratio involves a calculation of the compensation of the “highest paid managerial employee” and dividing it by the “median compensation” of the employees based in San Francisco. However, the text of the  initiative does not state whether the “highest paid managerial employee” has to be based in San Francisco.  So, for example, a business operating within San Francisco, but with headquarters in another city or state, may have to calculate its ratio based on the compensation of an executive who works in another state.

The tax rate increases depending on the ratio.  For example, if the calculated ratio is 100:1, the additional tax is 0.1% of the “gross receipts” otherwise attributable to San Francisco under existing law.  The tax goes up to 0.6% for ratios of 600:1.  As an example, if the “median compensation” of the SF-based workers is $50,000 / year (which will require a number of calculations), the 0.1% tax will kick in if the “highest paid managerial employee” earns more than $5,000,000.  The rate increases to 0.2% if the “highest paid executive” earns $10,000,000 or more. Etc.  Again, this tax is on top of the existing San Francisco taxes.

For businesses operating administrative offices and not generating gross receipts in San Francisco, the tax is based on San Francisco-attributable payroll. The tax percentages are different for this administrative office tax.

Employers should consult with the tax professional familiar with the San Francisco gross receipts tax / payroll tax to see if this initiative will apply and how it may affect tax liability in San Francisco. If the “highest paid executive” need not work in San Francisco, this ordinance may affect a number of highly paid executives in publicly traded companies, etc.

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