A California Chamber of Commerce-opposed job killer leave mandate that will significantly harm small employers in California with as few as 10 employees has been revived in the Legislature.
The bill expands parental leave to employers with 10-49 employees and may create litigation for employers of 50 or more currently covered under the California Family Rights Act (CFRA) and the federal Family and Medical Leave Act (FMLA).
On August 11, language from the already-dead job killer, SB 1166 (Jackson; D-Santa Barbara), was substituted for the content of what had been another job killer bill on an unrelated subject (hazardous waste permit process).
Like SB 1166, the newly gutted and amended SB 654 (Jackson; D-Santa Barbara) unduly burdens and increases costs of small employers with as few as 10 employees, as well as large employers with 50 or more employees, by requiring 12 weeks of protected employee leave for maternity or paternity leave, and exposes all employers to the threat of costly litigation.
Besides adding to the burdens under which small employers already struggle, SB 654 could potentially require larger employers to provide 10 months of protected leave.
SB 1166 died when the bill failed to pass the Assembly Labor and Employment Committee on June 22. Since then, the former committee chair has been removed from Assembly Labor and Employment and one of the two committee members to vote for the bill has been elevated to the chairmanship.
In an August 12 news release, Senator Hannah-Beth Jackson thanked both Assembly Speaker Anthony Rendon (D-Paramount) and Senate President Pro Tem Kevin de León (D-Los Angeles) for their support in giving her bill a second chance. De León also was the author of SB 654 in its previous incarnation.
Hurts Small Employers
The CalChamber has identified SB 654 as a job killer because, as amended on August 11, it targets small employers with only 10 employees and requires those employers to provide 12 weeks of leave, in addition to the other leaves of absence California already imposes. This mandate will overwhelm small employers as follows:
• SB 654 Creates a 7-Month Protected Leave of Absence on Small Employers: California already requires employers with 5 or more employees to provide up to 4 months of protected leave for an employee who suffers a medical disability because of pregnancy. SB 654 will add another 12 weeks of leave for the same employee, totaling 7 months of protected leave. Requiring a small employer with a limited workforce to accommodate such an extensive period is unreasonable.
• SB 654 Imposes a Mandatory Leave, with No Discretion to the Employer: As a “protected leave,” with a threat of litigation, SB 654 mandates the small employer to provide 3 months of leave. The leave under SB 654 must be given at the employee’s request, regardless of whether the employer has other employees out on other California-required leaves. This mandate on such a small employer with a limited workforce creates a significant challenge for the employer’s ability to maintain operations.
• SB 654 Imposes Additional Costs on Small Employers That Are Struggling with the Increased Minimum Wage: Even though the leave under SB 654 is not “paid” by the employer, that does not mean the small employer will not suffer added costs. While the employee is on leave, the employer will have to: 1) maintain medical benefits for the employee; 2) pay for a temporary employee to cover for the employee on leave, usually at a higher premium given the limited duration of employment; or 3) pay overtime to other employees to cover the work of the employee on leave. The cost of overtime is higher given the increase of the minimum wage, which will add to the overall cost for small employers.
• SB 654 Exposes Small Employers to Costly Litigation: SB 654 labels an employer’s failure to provide the 12-week leave of absence as an “unlawful employment practice.” This label is significant as it exposes an employer to costly litigation under the Fair Employment and Housing Act (FEHA). An employee who believes the employer did not provide the 12 weeks of protected leave, failed to return the employee to the same or comparable position, or did not maintain benefits while the employee was out on the 12 weeks of leave, could pursue a claim against the employer seeking: compensatory damages, injunctive relief, declaratory relief, punitive damages, and attorney’s fees.
A 2015 study by insurance provider Hiscox about the cost of employee lawsuits under FEHA estimated that the cost for a small to mid-size employer to defend and settle a single plaintiff discrimination claim was approximately $125,000. This amount, especially for a small employer, reflects the financial risk associated with defending a lawsuit under FEHA, such as the litigation created by SB 654, and the ability to leverage an employer into resolving or settling the case regardless of merit.
California already imposes on employers a list of family-friendly leaves of absence (see Multiple Protected Leaves in California article). The National Conference of State Legislatures already recognizes California as one of the most family-friendly states.
California’s list of programs and protected leaves of absence includes: paid sick days, school activities leave, kin care, paid family leave program, pregnancy disability leave, and the California Family Rights Act. This list is in addition to the leaves of absence required by federal law. Imposing another 12-week leave of absence mandate, targeted specifically at small employers, is simply too much for employers to bear.
SB 654 creates the potential for larger employers to provide 10 months of protected leave: California employers with 50 or more employees already have to provide the following leave for employees:
Up to 4 months – pregnancy disability leave/Family and Medical Leave Act (FMLA);
3 months – child bonding leave under FMLA/California Family Rights Act (CFRA)
To the extent the new leave under SB 654 is interpreted through case law or regulation differently than the leave under CFRA, that lack of conformity could create the opportunity for two separate 12-week leaves of absence for employers with 50 or more employees, in total, a potential leave of absence of 10 months.
Although SB 654 seeks to acknowledge and address this issue in proposed Section 12945.6(b) by stating that the total amount of leave an employee can receive under this bill, CFRA and FMLA is 12 weeks in a 12-month period, this does not fix the situation. California cannot preempt or limit the application of federal law under FMLA. In addition, proposed Section 12945.6(c) appears to nullify any limitation on total leave taken as set forth in Section 12945.6(b), as it explicitly states an employee is entitled to take CFRA or FMLA leave, assuming the employee is qualified for that leave.
SB 654 has been assigned to the Assembly Labor and Employment and the Assembly Appropriations committees.
The CalChamber is urging businesses to contact their Assembly representatives and ask them to vote no on SB 654.