As 2024 draws near, so does a slew of new laws and regulations that will affect California businesses.
Every year, laws passed by the state Legislature and signed into law by the governor take effect, and 2023 was a busy legislative session in Sacramento. The end result is another round of new legislation that employers need to stay on top of.
This article is the first of two parts and below we highlight the first five of the top 10 laws and regulations affecting businesses in the new year.
1. Sick leave law expanded
A new law that takes effect Jan. 1 will increase the amount of paid sick leave days California workers are eligible for to five days (40 hours), up from the current three, or 24 hours.
The new legislation applies to virtually all employees in the state. Under the law, employers have two options for providing sick leave:
Up front: Employers can provide all five paid sick days up front for the year, and these days can be used immediately.
Accrual: Under the new law, if an employer chooses the accrual method, it has two choices to build up paid sick leave:
- Accruing one hour of paid sick leave for every 30 hours worked, or
- Providing 40 hours of paid sick leave by the 200th day of the year (up from the current 24 hours by the 120th day of the year).
Businesses must allow employees to use their available sick balance beginning 90 days after the start of employment.
2. Pre-employment cannabis screening
Starting 2024, employers in California will no longer be allowed to ask a job applicant about past cannabis use.
The legislation, SB 700, bars employers from conducting pre-employment drug screenings for cannabis. In addition, the new law, which takes effect Jan. 1, prohibits companies from penalizing workers for their off-the-clock cannabis use.
The new law will take effect at the same time as another measure, AB 2188, which was passed by the legislature in 2022. That law makes it unlawful for employers to “discriminate” against a person in hiring, termination or any term or condition of employment based upon:
- Their use of cannabis off the job and away from the workplace.
- Failing a workplace drug test that only detects inactive cannabis compounds called metabolites. These non-psychoactive compounds do not indicate impairment, only that an individual has consumed cannabis in the last few weeks.
The law does not allow workers to use cannabis while on the job.
3. FAIR Plan increases its limits
With more and more California businesses being forced to go to the California FAIR Plan for their insurance coverage, the market of last resort has moved to increase its commercial property coverage limits significantly as the old limits were not sufficient for many commercial buildings.
This should bring a semblance of relief to companies located in wildfire-prone areas, who have seen their commercial property insurance non-renewed and who have been unable to find replacement coverage.
The decision comes as commercial property rates continue rising due to inflationary pressures, but in particular for companies located in areas that are considered urban-wildland interfaces.
The FAIR Plan has increased its coverage limits per location for businesses as follows:
Division I commercial property program — The limit will increase to $20 million per location from the current $8.4 million.
Division II commercial property program — The limit will increase to $20 million per location from the current $7.2 million.
4. Workplace violence law
A new law, which takes effect July 1, 2024, will require any California employer with at least one worker to “establish, implement and maintain” a workplace violence prevention plan, as well as require employers to conduct annual workplace violence prevention training and to keep an incident log of violent incidents in the workplace.
The prevention plan must include the following:
- Procedures for the employer to accept and respond to reports of workplace violence, and to prohibit retaliation against an employee who makes such a report.
- Procedures to communicate with employees regarding workplace violence, including:
- How to report a violent incident, threat or other workplace violence concern;
- Effective means to alert employees to the presence of a workplace violence emergency; and
- How to obtain help from staff assigned to respond and/or law enforcement.
- Procedures for responding to actual and potential workplace violence emergencies.
- Procedures to identify and evaluate workplace violence hazards.
Employers will also be required to train their workers on the plan and on how to respond to violent incidents or threats of violence.
Cal/OSHA will typically create model programs or plans for employers to follow. It has not yet stated it will do so, but it likely will as it has in the past when requiring implementation of specific prevention plans.
5. Treasury reporting rule
A new Treasury Department rule requires businesses with fewer than 20 employees and less than $5 million in revenue to report ownership and control information to the Financial Crimes Enforcement Network (FinCEN) as part of an effort to cut down on fraud, money laundering and the funding of terrorism that could run through anonymous business entities.
The new rule was prompted by the passage of the Corporate Transparency Act (CTA) enacted in 2021, but which takes effect Jan. 1, 2024.
Companies formed after Jan. 1 will have 30 days to file that information with FinCEN. Existing companies will have to start filing that information starting Jan. 1, 2025.
While the rule exempts many firms from reporting obligations, FinCEN estimates that the rule will affect more than 32 million organizations nationwide, imposing a new compliance burden for businesses throughout the country.
Failure to comply with the CTA’s reporting requirements can lead to civil and criminal penalties, including a maximum civil penalty of $500 per day (up to $10,000) and imprisonment for up to two years.
Next week we’ll cover the next five laws that employers need to be aware of going into 2024.
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