Saturday, November 26, 2022

COVID Paid Sick Leave, Tax Credit Package Moving

The Legislature will take its first actions on Governor Gavin Newsom’s proposed 2022 budget and policy proposals this week and next, after negotiating a package deal to reduce the tax bite on employers and implement a second year of pandemic-specific sick leave, which includes improvements to last year’s sick leave mandate.

“Healthy workers and healthy customers are good for business,” said California Chamber of Commerce President and CEO Jennifer Barrera when the proposal to extend COVID-19 paid sick benefits was released on January 23.

The proposal, developed with CalChamber input, “is a balanced approach to protect both workers and our economy,” Barrera said.

“By allowing workers who contract COVID-19 to stay home until they test negative, employers are, once again, leading the way on efforts to contain the virus and creating healthier workplaces that are safe for both employees and customers.”

Restoring Tax Credits

In January, the Governor proposed restoring the full use of tax credits, including the research and development tax credit, and the ability to utilize net operating loss carryforwards, which had been suspended in 2020 in the teeth of the pandemic recession. At the time, state leaders feared massive budget shortfalls and enacted more than $10 billion in tax hikes on businesses.

Fast forward to today — the Governor anticipates a second straight year of massive budget surpluses, leading to his call to restore these tax tools and incentives.

The budget argument was bolstered by research commissioned by the CalChamber and produced by the Milken Institute that found the research and development tax credit spurred innovation and created high-paying jobs in all regions of California and in many diverse economic sectors. Among many others, Assemblymembers Evan Low (D-Campbell), Cottie Petrie-Norris (D-Laguna Beach) and Kevin Mullin (D-South San Francisco) championed the restoration of these tax tools.

The Legislature also may act on several additional incentives and assistance proposed by the Governor in January. These include state tax conformity for California recipients of federal relief grants in significantly impacted industries, the waiver of initial filing fees for new businesses, and support for small businesses previously waitlisted in prior rounds of the state’s Small Business COVID-19 Relief Grant Program.

Legislative approval of the Governor’s proposals will help small businesses on their road to recovery, as well as signal California’s commitment to a stable and predictable tax structure that welcomes innovation and risk-taking.

COVID Sick Leave Extension

Moved by the surge in omicron cases — and intense interest by Democrats in the Legislature — the Governor also proposed extending the temporary sick leave benefit for COVID-related illnesses for another nine months. The benefit will apply again to employees who have contracted COVID-19, are subject to quarantine or isolation, as defined by state or federal authorities, are getting the vaccine or recovering from side effects, or who are caring for sick family members or children unable to attend school.

The proposal maintains the exemption for small businesses (fewer than 26 employees) to provide the benefit, despite pressure from labor advocates to apply the mandate to all employers, and will be limited in duration — expiring at the end of September 2022.

Responding to concerns raised by CalChamber and other employer advocates, the Governor improved the sick leave benefit and reduced compliance costs by:

• Allowing employers to mandate proof of a positive COVID-19 test if the employee is seeking more than 40 hours of leave;

• Limiting to 40 hours the overall number of hours an employee can use, unless the employee or a family member tests positive for COVID-19;

• Limiting the number of hours that can be used to attend a vaccine appointment or recover from vaccine-related side effects to 24 hours;

• Ensuring the rate of pay matches existing paid sick leave; and

• Easing compliance for reporting on wage statements.

The revised proposal makes reinstatement of the leave “far more affordable and manageable,” Barrera said. “While we understand this additional leave will be shouldered by many employers, the proposal is more limited in scope and duration than what was originally discussed. We appreciate productive discussions with the Governor’s office, Legislature, and advocates for labor.”

Staff Contacts: Ashley Hoffman, Preston Young

Ashley Hoffman
Ashley Hoffman
Ashley Hoffman joined the CalChamber in August 2020 as a policy advocate specializing in labor and employment and workers’ compensation issues. Before joining the CalChamber, she was an associate attorney in the Sacramento office of Jackson Lewis P.C., representing employers in civil litigation and administrative matters, as well as advising employers on best practices, including compliance with labor laws. She previously worked as a litigation associate and a summer associate at Gibson, Dunn & Crutcher, LLP, Los Angeles. She also was a law clerk at the U.S. District Court for the Western District of Tennessee in Memphis and a judicial extern for the Ninth Circuit U.S. Court of Appeals in Pasadena. Hoffman holds a B.A. with high honors in political science from the University of California, Santa Barbara, and earned her J.D. from the UCLA School of Law, where she was a Michael T. Masin scholar, an editor at the UCLA Law Review, and staff member for the Women’s Law Journal.

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