2013 California Human Resources Updates


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Dozens of new California labor laws and Human Resources-related bills were passed, to go into effect on January 1, 2013. Many other changes affecting employers nationwide go into effect on 1/1, such as payroll tax limits, workers’ compensation insurance, federal employment regulations, and most significantly, the Patient Protection and Affordable Care Act, otherwise known as Health Care Reform. This 2013 California HR Updates report covers them all.

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2013 California Human Resources Updates

  1. 1. 2013HumanResourcesUpdates Inside: ▪ California Labor & Employment Law Updates ▪ Health Care Reform in 2013 ▪ Other PPACA Updates for 2013 ▪ Workers’ Compensation Reform ▪ 2013 Workers’ Compensation Insurance Rates ▪ Payroll & Taxes – 2013 Updates ▪ Employee Training & Development
  2. 2. California Labor & Employment Law UpdatesThe California legislative session ended on September 30, with Governor Jerry Brown signing many new bills into law. Whilesome of these employment laws  break new ground, most are extensions or expansions of existing legislation. They areeffective as of January 1, 2013. Below is a brief summary of ten new bills signed into law by the Governor: • SB 1038  - FEHC Duties Transferred to DFEH. This bill eliminates the California Fair Employment and Housing Commission (FEHC) and transfers the administrative hearing process and civil actions filed on behalf of a complainant directly to the Department of Fair Employment and Housing (DFEH). The biggest change is that the DFEH will now be able to bring complaints directly to court and require mandatory dispute resolution. • SB 1193 - Human Trafficking. This bill will require certain employers to post a notice that contains information related to slavery and human trafficking in a conspicuous area, readily visible to employees and the public. • SB 1255 - Itemized Wage Statements. This law restores and clarifies the itemized wage statement requirements of the Labor Code after several court decisions weakened the statute’s worker protections. This bill provides that an employee is deemed to suffer injury and is entitled to monetary compensation if the employer fails to provide accurate and complete information and the employee cannot promptly and easily determine from the wage statement alone all of the information required by the statute. • AB 1775  - Wage Garnishments: Exempt Earnings. Increases the amount of wages protected from garnishment. Under existing law, the maximum amount of wages exempt from garnishment was the lesser of 25% of an individual’s weekly disposable earnings or 30 times the federal minimum hourly wage (i.e. 30 x $7.25). Under the new law, the maximum amount of wages exempt from garnishment will be the lesser of 25% of an individual’s weekly disposable earnings or 40 times the California minimum wage (40 x $8.00). • AB 1844 - Social Media Password Restrictions. Prohibits an employer from requiring or requesting an employee or applicant for employment to disclose a username or password for the purpose of accessing personal social media, to access personal social media in the presence of the employer, or to divulge any personal social media. • AB 1845 - Unemployment Insurance: This bill would provide that an employer’s reserve account is not relieved of charges relating to a benefit overpayment established on or after October 22, 2013, if the Employment Development Department determines that the payment was made because the employer, or an agent of the employer, was at fault for failing to respond timely or adequately to requests of the Department for information relating to the individual claim for unemployment compensation benefits. • AB 1964 - Protection of Religious Dress and Behavior. An extension of the Fair Employment and Housing Act (FEHA), this“ bill includes religious dress or religious grooming practices as a belief or observance covered by the protections against The California legislative season ended on September 30, with many new bills signed into law. While some of these employment laws break “ religious discrimination. It specifies that segregating an individual because of their religious dress or grooming practice that would require that person to be segregated from other employees is not considered a reasonable accommodation. new ground, most are extensions or expansions of existing legislation.
  3. 3. • AB 2103  - Wage and Hour Overtime Laws.  Prohibits paying a salary to non-exempt employees that includes compensation for overtime hours (this law was designed to overturn a 2011 court decision).• AB 2370 & SB 1381 - Intellectual Disabilities. The term “Intellectual disability” will replace the outdated term “mental retardation” in statutes and regulations that contain this term.• AB 2386 - Breastfeeding in the Workplace.  This law amends the California Fair Employment and Housing Act to provide that the term “sex” includes breastfeeding or medical conditions related to breastfeeding an affords additional legal protections to women engaging in these activities.• AB 2396 - Employment of infants in the entertainment industry. This bill extends the current law which restricts the employment of infants in the entertainment industry, by requiring the completion and submission of a medical certification and approval before a temporary permit may be issued.• AB 2674 - Inspection of Employee Files. Under this expansion of the existing law, both current and former employees must be granted access to their employee files, employers must develop and provide written request forms upon the verbal request of an employee to view their files, and employers must provide copies to the employee within 30 days of the request, or face a penalty.• AB-2675  - Employment Contract Requirements. Employment contracts involving commissions as a method of payment must (1) be in writing; (2) set forth the method by which the commissions are required to be computed and paid; and (3) contain a singed receipt for the contract from each employee. AB 2675 clarifies that the term “commissions” does not include short-term productivity bonuses, temporary variable incentive payments that increase but do not decrease payment under the written contract, or bonus and profit-sharing plans, unless the employer has offered to pay a fixed percentage of sales or profits as compensation for work to be performed 2
  4. 4. Health Care Reform in 2013With over 2500 pages and some 450 provisions, the Patient Protection and Affordable Care Act (PPACA, or Health Care Reform) isone of the most complex pieces of legislation ever signed into law. The PPACA touches every sector – from individual citizens, tosmall businesses, to large corporations, to the Federal government itself.With the re-election of Barack Obama and the 2012 Supreme Court Decision to uphold the constitutionality of the law, employersmust now focus on understanding the legislation and the financial impact on their business. Below is a brief outline of some keypoints relating to the monetary obligations and risks of Health Care Reform. 1. What is a Health Benefit Exchange? EXAMPLE: An employer with 80 employees will be subject to a penalty of $8333 per month Each state is charged with establishing, as a governmental agency or nonprofit entity, an American Health Benefit (80-30 = 50 X $166.66). Exchange. These Exchanges have two functions: 3. Could an employer who does offer coverage still be 1. To facilitate the purchase of qualified health plans subject to penalties? 2. To provide for the establishment of a Small Even in some circumstances, employers with 51 Business Health Options Program (referred to as or more full-time equivalent employees that offer a “SHOP Exchange”). A SHOP Exchange will assist insurance may still be subject to a penalty. employers in enrolling employees in small group qualified health benefits plans. States may establish This applies when the employer’s plan does not meet a single Exchange that performs both functions, or PPACA’s definition of “affordable”, or if the employer’s create separate Exchanges. plan pays for less than 60% of the covered expenses. If an eligible employee then obtains a premium credit in Grants will be made available to states by the Department an exchange plan, the employer is subject to a penalty. of Health and Human Services (HHS) for planning and establishing an Exchange. However, by 2015, Exchanges 4. What are the individual penalties? must be self-sustaining and may generate revenue through assessments or fees. If a state chooses not to Beginning in 2014, PPACA requires individuals to establish an exchange, the Federal government will set maintain health insurance, with some exceptions. up federal health insurance exchanges. Most individuals will be required to maintain minimum essential coverage. Those who do not 2. What are the penalties for employers who do not offer comply, and who are not exempt, will be required to coverage? pay a penalty per individual and tax dependent equal to the greater of the following: Beginning in 2014, an employer with 51 or more full-time   equivalent employees during the preceding calendar $95 or 1.0% of adjusted income in 2014 year, will be penalized if any of their full-time employees $325 or 2.0% of adjusted income in 2015 are not offered coverage (and obtains a premium credit through the exchange). In 2014, the monthly penalty $695 or 2.5% of adjusted income in 2016 per employee will be equal to the number of full-time employees, minus 30, multiplied by $166.66 ($2,000 per These are just a few of the common questions year, divided by 12) for any applicable month. related to Health Care Reform. For a more thorough analysis, please visit our dedicated PPACA webpage at The amount of the penalty will increase in subsequent years. http://bit.ly/health-care-reform-info.
  5. 5. Other PPACA Updatesfor 2013Women’s Health Coverage Expansion Effective for plan years beginning on or after 8/1/12, thisprovision expands the list of preventive coverages thatmust be offered to women at no cost to the insured.The list includes well-woman visits, gestational diabetesscreening, HPV DNA testing, sexually transmitted infectionscounseling, HIV screening and counseling, contraceptionand contraceptive counseling, breastfeeding support, anddomestic violence screening.Flexible Spending Account Limit (FSA)Effective for plan years beginning on or after 1/1/13, thisprovision limits the annual amount that can be contributed to an FSA for medicalexpense to $2,500.Medical Care Cost Reporting on W2This requirement is for the tax year ending 2012 for W2’sissued by 1/31/13 and applies to businesses who issuedover 250 W2’s in 2011. Both employee and employermedical care contributions amounts will be reported asrequired on the W2.Medicare Payroll Tax IncreaseEffective 1/1/13, this provision imposes an additional0.9% Medicare hospital insurance tax (HI tax) on self-employed individuals and employees with respect toearnings and wages received during the year above200k for individuals and above 250k for joint filers (notindexed). This provision does not change the employerside of the HI tax obligations. In addition there will be anew 3.8% Medicare contribution tax on certain unearnedincome from individuals over 200k (250k for joint). Employer Notice Requirement regarding Exchanges andPremium SubsidyThis provision requires employers to provide a noticeinforming employees of the availability of state healthcare exchanges and premium subsidy.State Notification to HHS Regarding ExchangesStates must submit a response to the Departmentof Health & Human Services (HHS) by December 14,2012 if they wish to operate a state-based exchange orpartnership exchange. 4
  6. 6. Workers’Compensation ReformIn September, 2012, Governor Jerry Brown signed a newbill (SB 863) into law, overhauling the  California workers’ 2013 Workers’compensation system. The purpose of the bill was to increasebenefits for injured employees by generating savings through Compensation Insurancevarious changes to the workers’ compensation system. Most ofthese changes will likely reduce the number of lawsuits filedover treatment and compensation. Rates On The RiseFollowing months of private negotiations between employers In October, 2012, the California WCIRB (Workers’ Compensationand labor union representatives, the legislation received Insurance Rating Bureau) voted to reflect a 0% increase to theirstrong bipartisan support, passing the Assembly with a 66-4 January 1, 2013 rate filing. The Bureau’s actuarial staff hadvote, the Senate, 34-4. originally recommended 12.6% increase, but then reduced it toThe general thrust of SB 863 changes California’s system for treating a 9.2% increase to reflect the impact of SB 863.and compensating injured workers. Some key elements include: Pressure by State Compensation Insurance Fund (SCIF) President • An increase of permanent disability benefits by $740 Tom Rowe not to increase rates at all resulted in a close 6-5 vote million, or an average increase of approximately 30 in favor against publishing any increases. Rowe reasoned that percent; filing for 0% would put the right kind of pressure on the workers’ compensation system to ensure that the upcoming regulations • Creates a $120 million program for injured workers who experience all the savings that were intended by the creators of cannot go back to a job at their previous wage level; the legislation. • Provides cuts and dramatic reductions in medical costs However, a contentious hearing was held in mid-November and administrative procedures; between the WCIRB and California’s Insurance Commissioner • Limits the circumstances where lawsuits can be filled Dave Jones. In the meeting, Jones questioned the Bureau’s against the employers and insurance companies. decision to recommend no increase in premiums when all actuarial data indicated that an increase was necessary. InThe measure was praised by California businesses due to the end, the governing board members took just 45 minutesthe prospect of easing a potential 18% increase in workers’ to overturn the zero-increase decision. Commissioner Jonescompensation insurance costs in the following year. The State ultimately concluded on a 15.64% increase effective JanuaryCompensation Insurance Fund (SCIF) had stated it would reduce 1, 2013, 3 percentage points higher than the Bureau originallyemployers’ premiums should the legislation be enacted. recommended. It is believed that this decision is the first time“These significant reforms save hundreds of millions of dollars in California’s history that a Commissioner increased rates morefor California’s employers while preventing an imminent crisis than what the industry officially requested.of skyrocketing rates that would have hurt both injured workers What it means to California employersand businesses,” Brown said in a statement. “It’s extraordinary to see Republicans and Democrats come together to These increases come at a difficult time for California employers. solve a problem before it becomes a crisis.” While the economy and unemployment improves across the nation, California still faces an unemployment rate over 10% and The only opposition to the bill stemmed some of the highest workers’ compensation insurance rates in from lawyers who represent injured the country. Now more than ever, state-based employers must workers and some medical care proactively pursue best-practices in risk management and safety and rehabilitation engineering. By conducting regular work-place inspections, groups. ongoing safety training, and proactive claims management, employers can significantly reduce the frequency and severity of workplace injuries, ultimately leading to lower workers’ compensation costs. While controlling state-issued insurance rates are beyond an employer’s control, managing workplace safety is not. CPEhr employs a fully staffed risk management department, managing the entire workers’ compensation process from on-site inspections and written safety procedures, to claims administration and insurance carrier negotiations. Contact us for more information how to reduce risks, and insurance costs.
  7. 7. Payroll & Taxes – 2013 UpdatesThere are many updates and changes to payroll tax limits and withholdingamounts in 2013. Please review the information below carefully.FEDERAL TAXESFICA (Social Security) Maximum Taxable Earnings $113,700 ($110,100 in 2012) Employer 2013 Withholding Percent 6.2% No change from 2012 Employee 2013 Withholding Percent 6.2% (4.2% in 2012 for EE) Employer 2013 Maximum Withholding $7049.40 ($6,826.20 in 2012 for ER) Partnership for Employee 2013 Maximum Withholding $7049.40 FICA (Medicare) ($4,624.20 in 2012 for EE) Success: Maximum Taxable Earnings- No Limit Training and Development No change from 2012 Employer/Employee 2013 Withholding Percentage 1.45% With health care, employment law and insurance No change from 2012 guidelines changing so rapidly, employers must take Employer/Employee 2013 Maximum Withholding No Limit No change from 2012 a proactive stance to understand these changes and Additional Medicare Tax for Wages in Excess of $200,000 – Rate 0.9%, how they will impact their business. CPEhr is proud to is required to be deducted by Employers offer a complimentary webinar series covering a wide Employee share only range of Human Resources, Safety, Insurance andSUPPLEMENTAL WAGES Health Care topics, delivered by experienced experts Rate (flat rate withholding method) 25% and trainers. We invite you to join our next webinar! Over $1 million 35% Details and registration can be found at www.cpehr. No change from 2012 com/webinar-registration.Federal WithholdingThe 2013 federal withholding tables have not been finalized, as Congress hasnot yet finalized their decision on whether to adjust the tax rates. Any chang- TOPIC DATEes in the withholding tables will be communicated once they have been an-nounced. Future of Health Care Reform Thursday, 1/17401(k) PLAN DEFERRAL LIMITATIONS Employment and Labor Law: 2013 Updates Elective Deferrals $17,500 Thursday, 2/14 ($500 increase from 2012) Basics of Harassment Training in California 401(k) Catch-Up Contribution Deferrals $5,500 Thursday, 3/28 No change from 2012HSA PLAN DEFERRAL LIMITATIONS Substance Abuse in the Workplace Thursday, 4/25 Individual Maximum Contribution $3,250 Documentation & Recordkeeping Thursday, 5/30 (Includes Employer Contribution (up $150 from 2012) Family Maximum Contribution $6,450 Assessing the Skill Level of your Managers (Includes Employer Contribution) (up $200 from 2012) Thursday, 6/27 Catch Up Contributions (55+ years old) $1,000 Medicare 101 Thursday 7/ 25 No change from 2012CALIFORNIA TAXES Advanced Workplace Safety Thursday, 8/ 29SUPPLEMENTAL WAGE WITHHOLDINGS Basics of Legal Hiring Thursday, 9/26 Bonuses & Earnings from Stock Options 10.23% No change from 2012 How to Effectively Manage Through Change Other Supplemental Earnings 6.60% Thursday, 10/31 No change from 2012 How to Legally Terminate Thursday, 11/28DISABILITY INSURANCE (Employee Paid) Maximum 2013 Wages Subject to Withholding $100,880 (up $5,295 from 2012) Employee 2012 Withholding Percentage 1.0% For more information or registration, No change from 2012 visit www.cpehr.com. Employee 2012 Maximum Deduction $1008.80 (up $52.95 from 2012) 6
  8. 8. About UsCPEhr, which is celebrating its 30th anniversary, isCalifornia’s premier provider of Human ResourcesOutsourcing and Professional Employer Organization(“PEO”) services. Our unrivaled industry experiencecombined with the flexibility afforded to a privately heldcorporation, allows CPEhr to deliver highly customizedhuman resources support, while at the same time offeringbenefits typically associated with Fortune 500 companies.We are proud of our commitment to customer serviceand personalized client relationships. We provideprofessional service to companies in a wide range ofindustries with workforces ranging from 2 to 20,000. With a retention rate that exceeds 90%, we know ourteam members are committed to our clients’ success. CPEhr’s flat hierarchy means our executive team isalways available to you.Services include: • HR Compliance • Employment Administration • Employee Benefits • Risk Management • Payroll and Tax • Training • Recruiting9000 Sunset Blvd., #900West Hollywood, CA 90069www.cpehr.comPH: 800.850.7133FAX: 310.888.8420