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Failed, Vetoed, or Amended

Industry Disruptors

SB 1445 (Allen, D-Santa Monica) and AB 326 (Muratsuchi, D-Torrance) would have created a new legal framework for vehicle rentals and leases by separately licensing an “electric mobility manufacturer” and allowing it to offer “membership agreements” to customers for use of “electric mobility manufacturer vehicles”.

DEALER IMPACT: Avoided the creation of a narrowly tailored, unnecessary, anti-competitive program for one company to circumvent existing franchise, vehicle retailing, and consumer protection laws.

Vehicle Finance Forbearance

AB 2501 (Limón, D-Santa Barbara) would have prohibited a servicer of vehicle-secured credit from taking any action to use self-help to repossess a mobile home or motor vehicle during the COVID-19 pandemic until January 1, 2023. The bill would have authorized a consumer experiencing a financial hardship during the COVID-19 pandemic to request forbearance from any vehicle-secured credit obligation by submitting a hardship request to the servicer of vehicle-secured credit, and would have required a servicer to provide such forbearance.

DEALER IMPACT: Avoided dealers and auto lenders being restricted from collecting vehicle loan payments and conducting repossessions during the COVID-19 pandemic.

Vehicle History Report Inaccuracies

AB 2111 (Maienschein, D-San Diego) would have provided that a dealer is not liable to a party to an actual or potential vehicle sale or lease for the accuracy of, or any errors or omissions contained in, a vehicle history report if the inaccuracies, errors, or omissions contained in the report are not based on information provided to the vehicle history report provider by that dealer. CNCDA sponsored this bill but we were asked to not pursue due to the COVID-19 pandemic.

DEALER IMPACT: Inaccuracies contained in vehicle history reports that appear weeks, months, and sometimes years after a vehicle is sold remain problematic for dealers.

Temp Tag Modification

AB 2087 (Daly, D-Anaheim) would have required a dealer or lessor-retailer, when selling a vehicle, to attach for display a copy of a report-of-sale form to the vehicle before the vehicle is delivered to the purchaser only if the dealer does not attach a temporary license plate to the vehicle. CNCDA sponsored this bill but we were asked to not pursue due to the COVID-19 pandemic.

DEALER IMPACT: Dealers must continue attaching both temporary license plates and a copy of the report-of-sale form to the vehicle before it is delivered to the purchaser.

ZEV Trade-In Credit

AB 938 (Rivas, D-Hollister) would, before January 1, 2025, exclude from “gross receipts” and “sales price” the value of a trade-in vehicle 11 years old or more that is traded in for a zero-emission vehicle if the value of the qualified trade-in motor vehicle is separately stated on the invoice or bill of sale or similar document provided to the purchaser. CNCDA sponsored this bill but it did not advance due to state fiscal concerns.

DEALER IMPACT: California will not implement a trade-in credit for zero-emission vehicle purchasers as an incentive.

ZEV License Plate

AB 3004 (Rivas, D-Hollister) would have authorized a “Go Green” specialized license plate program exclusively available for zero-emission vehicles that would have generated revenue for the Enhanced Fleet Modernization Subaccount to help provide additional funding for the retirement of older polluting vehicles and incentivize the purchase of new and used zero-emission vehicles. CNCDA sponsored this bill but we were asked to not pursue due to the COVID-19 pandemic.

DEALER IMPACT: California will not implement a new license plate program to recognize zero-emission vehicles and provide additional funding for the Enhanced Fleet Modernization Subaccount.

“Trusted Dealer” Certification

AB 2454 (D-Silicon Valley) would have required the Bureau of Automotive Repair to establish a “trusted dealer” certification program for automotive repair dealers who meet specified requirements, including payment of an annual fee and agreeing to be subject to up to 2 investigations by BAR’s enforcement program each year.

DEALER IMPACT: Avoided an increase in BAR investigations of dealers’ service departments and a certification program that would essentially rank dealers higher who volunteer to undergo more investigations.

Towing and Storage Fees

AB 2419 (Santiago, D-Los Angeles) would have imposed more restrictions on allowable fees charged for vehicle towing and storage.

DEALER IMPACT: Avoided more restrictions on allowable fees for vehicle towing and storage.

PAGA Reform

SB 1129 (Dodd, D-Napa) would have reformed PAGA by requiring an employee alleging a violation of itemized wage statement provisions to provide written notice to the employer of the alleged violation, including the facts and theories to support the alleged violation, and would allow the employer 65 calendar days to cure the violation. The bill also would have reduced from 3 years to one year the past itemized wage statements that the employer is required to provide in order to cure a violation and would have limited the amount of penalties that may be recovered to $5,000 if the aggrieved employees did not suffer actual economic or physical harm.

DEALER IMPACT: Dealers will remain unable to cure alleged wage statement violations after a complaint has been filed and plaintiffs remain able to bring PAGA lawsuits even without a showing of actual economic or physical harm.

Gender-Based Price Discrepancies

SB 873 (Jackson, D-Santa Barbara) would have prohibited a business establishment from discriminating against a person because of a person’s gender with respect to the price charged for any 2 consumer products from the same manufacturer that are substantially similar if those products are priced differently based on the gender of the individuals for whose use the products are intended or marketed.

DEALER IMPACT: Avoided new litigation alleging gender discrimination in the context of vehicle sales.

ZEV Sales Tax Exemption

SB 1330 (Umberg, D-Orange County) would have provided an exemption from those taxes with respect to the sale, storage, or use of an electric or a hybrid electric vehicle with a final listing price less than $25,000.

DEALER IMPACT: Would have provided a valuable inventive to encourage the purchase of zero-emission and hybrid electric vehicles.

Business Interruption Coverage

AB 1552 (Ramos, D-Highland and Limón, D-Santa Barbara) would have created an immediate, retroactive rebuttable presumption that, if alleged by the affected business, COVID-19 was in fact the direct cause of a claim for business interruption coverage for purposes of commercial insurance policy coverage. The bill would have prohibited COVID-19 from being excluded from a commercial insurance policy unless viruses were expressly excluded in the policy language.

DEALER IMPACT: Dealerships that were closed or impacted by the COVID-19 pandemic and denied business interruption coverage by commercial insurance providers lose an avenue for retroactive coverage.

Business Eviction Protection

SB 939 (Wiener, D-San Francisco and Lena Gonzalez, D-Long Beach) would have prohibited a commercial landlord from evicting a commercial tenant impacted by COVID-19 until 90 days after Governor Newsom’s COVID-19 state of emergency is lifted.

DEALER IMPACT: Dealerships impacted by COVID-19 unable to pay commercial rent do not have the above protection from eviction.

Expansion of Bereavement Leave

AB 2999 (Low, D-Silicon Valley) would have enacted the Bereavement Leave Act of 2020, which would have required employers with 25 or more employees to grant an employee up to 10 business days of unpaid bereavement leave and employers with fewer than 25 employees to grant an employee 3 business days of unpaid bereavement leave upon the death of a spouse, child, parent, sibling, grandparent, grandchild, or domestic partner.

DEALER IMPACT: Avoided a further expansion of employee leave mandates.

Coronavirus Workers’ Compensation Coverage

AB 196 (Gonzalez, D-San Diego) would have created a conclusive disputable presumption for purposes of workers’ compensation that an essential worker who contracted coronavirus got the virus because of their employment. That presumption would have been extended for 90 days following termination of the employee’s service for a period of 90 days.

DEALER IMPACT: Dealership employees deemed essential workers who contracted the coronavirus during employment with the dealership, and up to 90 days after termination, would have been covered under workers’ compensation pursuant to this bill.

AB 5 Exemptions

AB 1850 (Gonzalez, D-San Diego) would have exempted certain occupations from being subject to the ABC test for worker classification purposes and instead would have applied the worker classification test found in California Supreme Court decision in S.G. Borello & Sons, Inc. v. Department of Industrial Relations.

DEALER IMPACT: Additional industries did not receive further carve-outs from the ABC test mandated by AB 5.

Streamline Unclaimed Property

AB 2198 (Ting, D-San Francisco) would have streamlined processes related to the Unclaimed Property Law.

DEALER IMPACT: The processes related to returning unclaimed property to customers remain the same.

Employment

Most articles in this section were principally authored by the Littler Mendelson law firm. The “dealer impact” sections of the articles were authored by Fine, Boggs, and Perkins LLP. Special thanks to both law firms for their assistance in the preparation of these materials.

Minimum Wage Increases by Jurisdiction

Jurisdiction

Employer Type

Current Minimum Wage

Minimum wage rate effective 1/1/2021

Next Adjustment Date

Amount After Adjustment

California

25 or fewer employees

$12.00

$13.00

1/1/2022

$14.00

California

26 or more employees

$13.00

$14.00

1/1/2022

$15.00

Belmont

All

$15.00

$15.90

1/1/2022

$15.90+CPI

Berkeley

All

$16.07

$16.07

7/1/2021

$16.07+CPI

Cupertino

All

$15.35

$15.65 (est.)

1/1/2022

$16.00 (est.)

El Cerrito

All

$15.37

$15.61

1/1/2022

CPI

Emeryville

All

$16.84

$16.84

7/1/2021

CPI

Long Beach

Hotel employees

$15.47

$15.47

7/1/2021

CPI

Long Beach

25 or fewer employees

$12.00

$13.00

1/1/2022

$14.00

Long Beach

26 or more employees

$13.00

$14.00

1/1/2022

$15.00

Los Altos

All

$15.40

$15.65

1/1/2022

CPI

Los Angeles (City)

25 or fewer employees

$14.25

$14.25

7/1/2021

$15.00

Los Angeles (City)

26 or more employees

$15.00

$15.00

7/1/2021

CPI

Los Angeles County

25 or fewer employees

$14.25

$14.25

7/1/2021

$15.00

Los Angeles County

26 or more employees

$15.00

$15.00

7/1/2021

CPI

Malibu

25 or fewer employees

$14.25

$14.25

7/1/2021

$15.00

Malibu

26 or more employees

$15.00

$15.00

7/1/2021

CPI

Milpitas

All

$15.40

$15.40

7/1/2021

CPI

Mountain View

All

$16.05

$16.35 (est.)

1/1/2022

CPI

Oakland

All

$14.14

$14.44 (est.)

1/1/2022

CPI

Palo Alto

All

$15.40

$15.65

1/1/2022

CPI

Pasadena

25 or fewer employees

$14.25

$14.25

7/1/2021

$15.00

Pasadena

26 or more employees

$15.00

$15.00

7/1/2021

CPI

Redwood City

All

$15.38

$15.68 (est.)

1/1/2022

CPI

Richmond

All

$15.00

$15.30 (est.)

1/1/2022

CPI

Sacramento

100 or fewer employees

$12.50

$13.00

1/1/2022

$14.00

Sacramento

101 or more employees

$13.00

$14.00

1/1/2022

$15.00

San Diego

All

$13.00

$14.00

1/1/2022

CPI

San Francisco

All

$16.07

$16.07

7/1/2021

CPI

San Jose

All

$15.25

$15.45

1/1/2022

CPI

San Leandro

All

$15.00

$15.00

7/1/2021

CPI

San Mateo

All

$15.38

$15.62

1/1/2022

CPI

Santa Clara

All

$15.48

$15.65

1/1/2022

CPI

Santa Monica

25 or fewer employees

$14.25

$14.25

7/1/2021

$15.00

Santa Monica

26 or more employees

$15.00

$15.00

7/1/2021

$15.00

Sunnyvale

All

$16.05

$16.35 (est.)

1/1/2022

CPI

Based on best available data as of October 12, 2020. Dealers in affected local jurisdictions should contact counsel and/or review local guidance prior to making payroll adjustments.

New Notice and Reporting Obligations for COVID-19 Workplace Exposure

AB 685 is designed to allow the state to track COVID-19 cases in the workplace more closely. AB 685 expands Cal/ OSHA’s authority to issue Orders Prohibiting Use (OPU), otherwise known as Stop Work Orders, for workplaces that pose a risk of an “imminent hazard” relating to COVID-19, i.e., hazards threatening immediate and serious physical harm. The law also prescribes exhaustive notice requirements in the event of a COVID-19 exposure in the workplace, which includes providing written notice to “all employees” who were at the worksite within the infectious period who may have been exposed to the virus. AB 685 also enhances reporting requirements to local health authorities in the event of a COVID-19 outbreak in the worksite.

As a second measure, California’s Occupational Standards Health and Safety Board advanced an emergency rule to support those efforts. Employers should prepare for these changes.

What Kind of Notice Do I Need to Provide My Employees?

The new notice requires employers to take the following actions within one business day of a “potential exposure” based on a positive confirmed case of COVID-19 in the workplace:

  • Provide written notice to all employees, and employers of subcontracted employees who were at the worksite within the infectious period, who may have been exposed to COVID-19. Although the written notice requirement applies only to employees and subcontracted employees, employers should also consider notifying any identifiable third parties who were at the worksite during the infectious period.
  • Provide written notice to employee representatives, including unions and sometimes attorneys, who may represent employees.
  • Provide written notice to employees and/or employee representatives regarding COVID-19-related benefits that employee(s) may receive, including workers’ compensation benefits, COVID leave, paid sick leave, and the company’s anti-discrimination, anti-harassment, and anti-retaliation policies; and
  • Provide notice to employees regarding the company’s disinfection protocols and safety plan to eliminate any further exposures, per CDC guidelines.

Written notice may include, but is not limited to, personal service, e-mail, or text message if it can reasonably be anticipated to be received by the employee within one business day of sending and shall be in both English and the language understood by the majority of the employees.

The new law defines “worksite” as the building, store, facility, field, or other location where a worker worked during the infectious period. It does not apply to buildings, floors, or other locations of the employer that the infected individual did not enter. But employers should be realistic in assessing which employees would “never” have gone into other areas of the dealership, particularly where common areas (e.g., breakrooms or bathrooms) are considered.

How Does This Law Change How We Report COVID-19 Exposures?

The new law requires an employer that has a sufficient number of COVID-19 positive cases that meet the definition of a COVID-19 outbreak, as defined by the state Department of Public Health, to report prescribed information to the local public health agency in the jurisdiction of the worksite within 48 hours of learning of the outbreak. The definition of a COVID-19 outbreak will also be informed by the local health authority, which differs from the definition under the workers’ compensation presumption rule.

In addition, for a COVID-19-related fatality, employers must provide notification to the local health department of the name, number, occupation, and worksite of the employee who died due to a COVID-19 exposure. An employer shall also report the business address and North American Industry Classification System (NAICS) code of the worksite where the COVID-19-positive employee worked. An employer with an outbreak subject to this section shall continue to provide notice to the local health department of any subsequent laboratory- confirmed cases of COVID-19 at the worksite.

How Does This Law Change the Normal Cal/OSHA Process?

The new law fast tracks the timeline for issuing serious citations. Usually, whenever Cal/OSHA intends to issue a serious citation, the agency has to provide a “1BY” notice, whereby the employer is afforded notice by the agency of its intent to issue a “serious” citation, together with the specific safety orders and allegations to support those types of citations. Employers, in turn, are provided 15 days to provide additional evidence to support their defense, which could potentially inform whether Cal/OSHA will issue serious citations. Without this step, employers do not have the opportunity to “preview” Cal/OSHA’s serious allegations, to submit evidence and proof to address those allegations, or to have any meaningful dialogue with the Division before issuance of the citations. This means employers must closely monitor the statute of limitations to ensure that once they receive a citation, they immediately evaluate the classifications, allegations, and proposed penalties and determine whether an appeal is necessary.

AB 685’s removal of the 1BY notice period for COVID-related hazards also means employers should be careful to implement their COVID policies and produce documents to Cal/OSHA during an investigation, because they will not have an opportunity to raise legal defenses after a document request is complete until after the Division issues the serious citations.

How Will the Emergency Rule Change My Return-To-Work Process?

Once finalized, the new rule will probably require employers to create a COVID-19 “action plan” that will identify the workplace’s risks and determine how to control exposure through such measures as improving ventilation, social distancing, and protective gear. Up to this point, Cal/OSHA has issued citations under the Injury and Illness Prevention Standard, a “catch-all” safety order that applies to a workplace hazard not covered by any specific safety order. It is likely this COVID-specific rule will require employers to draft and implement a separate COVID-19 Pandemic Plan that addresses all COVID-19 exposures, and identifies how the employer will “correct” the exposures, enforce its procedures, provide training, conduct inspections, and review its processes for effectiveness. The rule might also establish requirements for employers to notify workers of confirmed or suspected COVID-19 cases similar to AB 685, mandate reporting to Cal/OSHA of cases that do not result in hospitalizations, and add practices to encourage potentially infected employees to stay home.

While the rule is not yet in effect, employers are strongly encouraged to consult counsel whenever (1) there is a positive confirmed case of COVID-19 for guidance on the proper notification/contact tracing requirements, and (2) whenever Cal/OSHA contacts them or if an inspector appears at the employer’s worksite.

DEALER IMPACT: This bill is very onerous on California dealers and will require significant new posting, administrative, and rapid reporting requirements. The penalties for noncompliance can be very significant. Dealers should focus on ensuring compliance.

The new law requires, for example, that dealers, within one business day of a notice of potential exposure, do the following:

  1. Provide written notice of potential exposure to all workers (including workers of subcontractors) who were on the premises;
  2. Provide information to potentially exposed workers relating to COVID-19-related benefits/protections to which the workers may be entitled under various laws (this includes federal, state, and local leave of absence laws);
  3. Notify all the same workers of the disinfection and safety plan that the employer plans to implement; and
  4. Provide the same written notices to any exclusive representative (“union”).

This “written notification” should be made in the same method normally used to convey information about employment, with personal notice, email, or text messages all authorized if they can reasonably be anticipated to be received within one business day. These notices must be made in English, as well as any other language understood by a majority of the employees. Copies of these notifications must be maintained for at least three years.

Also, if there is an “outbreak” (three or more laboratory-confirmed cases of COVID-19 within a two-week period among employees who live in different households) additional reporting to government officials is required within 48 hours, including the names, number, occupation, and worksite of exposed individuals, as well as the business address and NAICS code of the worksite where the exposed individuals work. Once this provision has been triggered, each individual subsequent laboratory-confirmed case must be similarly disclosed. Dealers must take this seriously as OSHA may issue significant fines and shut down the business entirely.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 84, Statutes of 2020; AB 685 (Reyes, D-San Bernardino).

Expansion of COVID-19 Supplemental Paid Sick Leave Requirements

AB 1867 sets forth five different areas of new or restated law, most of which are not that significant for California dealers. For that reason, those insignificant impacts will not be address herein.

The bill does, however, include a new requirement that employers with 500 or more employees in the U.S. (those that considered themselves exempt from FFCRA) provide employees with 80 hours (or portion thereof for part-time employees) of paid sick leave at the regular rate of pay for COVID-related reasons. Because it does not include the tax credit provisions of the FFCRA, it is a direct cost to the employer if such leave is used by employees.

Employers cannot require, as a condition of using leave, that workers search for or find a replacement worker to cover the days they use leave. Additionally, they cannot deny a worker the right to use leave, discharge, threaten to discharge, demote, suspend, or in any manner discriminate against a worker for using leave, attempting to exercise the right to use leave, filing a complaint with the California Labor Commissioner or alleging a violation of the law, cooperating in an investigation or prosecution of an alleged violation of the law, or opposing any policy or practice or act that the law prohibits. Moreover, there is a rebuttable presumption of retaliation if a hiring entity denies an employee the right to use leave, discharges, threatens to discharge, demotes, suspends, or in any manner discriminates against a worker within 30 days of any of the employee filing a complaint with the California Labor Commissioner, cooperating with an investigation or prosecution of an alleged violation, or opposing an unlawful policy, practice, or act.

There are also provisions that allow for offsets for other paid leave benefits already provided by dealers to employees for reasons covered by AB 1867. There will also be additional notification requirements on a notice/ poster to be provided by the Labor Commissioner. The new law requires written notice concerning the amount of leave available on either an itemized wage statement or in a separate writing provided on designated pay dates. In addition, for at least three years, a hiring entity must retain records documenting hours worked, leave provided, and leave used by an employee.

DEALER IMPACT: Since only a small number of dealers have more than 500 employees, it does not impact many California dealers. Dealers who are covered will have to provide such leave and notice requirements. A Leave Request Form has been created to assist dealers who fall into this category and is available from CNCDA and at: https://www.employerlawyers.com/legal-updates/.

EFFECTIVE DATE: September 9, 2020

Reference: Chapter 45, Statutes of 2020; AB 1867 (Committee on Budget).

Expanded Presumption of Workers’ Compensation Liability for COVID-19 Illness Claims

In May, California Governor Newsom signed Executive Order N-62-20, which created a rebuttable presumption that certain employees who test positive for COVID-19 contracted the virus at work for workers’ compensation purposes. With the governor’s order expiring on July 5, 2020, there was widespread speculation as to whether the Executive Order would be substantively formalized into legislation and, if so, what portions of the Executive Order would be expanded, extended, or amended. As expected, the California legislature has passed SB 1159, which creates a new framework for COVID-19-related workers’ compensation claims. As emergency legislation, this bill took effect on the day it was signed into law (September 17).

How Long is the Presumption Effective?

SB 1159 states that a “disputable presumption” exists for an employee who suffers illness or death resulting from COVID-19 on or after July 6, 2020 through January 1, 2023. Presumably, if an employee suffers an illness or death resulting from COVID-19 after January 1, 2023, the presumption no longer applies, and the case will be treated under the traditional workers’ compensation framework.

How Long Does the Claim Administrator Have to Deny the Claim?

SB 1159 creates a presumption that an illness or death resulting from COVID-19 arose out of and in the course and scope of employment. However, this presumption is disputable. An employer may dispute the presumption with evidence such as: (1) measures in place to reduce potential transmission of COVID-19 in the employee’s place of employment, (2) the employee’s non-occupational risks of COVID-19 infection, (3) statements made by the employee, and (4) any other evidence normally used to dispute a work-related injury.

The employer and claim administrator must work quickly to gather evidence to dispute the presumption. If the date of injury is before July 6, 2020, the claim administrator has 30 days to deny the claim. If the date of injury is on or after July 6, 2020, the claim administrator now has 45 days to deny the claim, or the injury is presumed compensable. The presumption of compensability is rebuttable but only with evidence discovered after the applicable investigation period.

Which Employees are Covered?

The presumption created by SB 1159 applies to all employees who: (1) test positive during an outbreak (defined below) at the employee’s specific place of employment, and (2) whose employer has five or more employees. The only injury for which the presumption applies is illness or death resulting from COVID-19. However, the following conditions must exist for the presumption to apply:

  • The employee tests positive for COVID-19 within 14 days after a day that the employee performed labor or services at the employee’s place of employment at the employer’s direction.
  • The day on which the employee performed labor or services at the employee’s place of employment at the employer’s direction was on or after July 6, 2020. This must be the last date the employee performed labor or services at the employee’s place of employment at the employer’s direction before the positive test.
  • The employee’s positive test occurred during a period of an outbreak at the employee’s specific place of employment.

Although not specifically addressed in this law, if the employee tested positive between March 19 and July 5, 2020 (i.e., when the Executive Order was in effect), then the Executive Order presumably controls.

What is a “Specific Place of Employment”?

Under SB 1159, a “specific place employment” specifically excludes an employee’s home or residence, unless the employee performs home health care services at a home or residence. However, a “specific place of employment” does include a “building, store, facility, or agricultural field where an employee performs work at the employer’s direction.” Not specifically addressed in this code section are employees who perform work outside of a “building, store, facility, or agricultural field” such as those employees who may visit customers’ homes for work. For these employees, one may argue there is no “specific place of employment” and, therefore, no presumption.

What Benefits is the Employee Entitled to?

If the presumption applies, the employee is entitled to “full hospital, surgical, medical treatment, disability indemnity, and death benefits.” However, the Department of Industrial Relations has waived entitlement to any death benefits under Labor Code Section 4706.5 in the event the deceased employee did not have any dependents.

SB 1159 treats entitlement to temporary disability benefits similarly to the May 6 Executive Order. SB 1159 states that if an employee is eligible for paid sick leave benefits “specifically available in response to COVID-19” such as those available under FFCRA, such benefits must be used and exhausted before using any temporary disability benefits. However, if an employee does not have such paid sick benefits available to them, then the employee must be provided temporary disability benefits without the traditional three-day waiting period.

If it is determined that an employee may be eligible for temporary disability benefits related to a COVID-19 illness or injury claim, whether an employee qualifies for temporary disability benefits depends on the date they tested positive or were diagnosed with COVID-19.

If the employee tests positive or is diagnosed with COVID-19 on or after May 6, 2020, the employee must be certified for temporary disability by a licensed physician within the first 15 days after the initial diagnosis, and then must be recertified every 15 days thereafter for the first 45 days following diagnosis.

If the employee tested positive or was diagnosed with COVID-19 before May 6, 2020, the employee must have obtained a certification no later than May 21, 2020 documenting the period for which the employee was temporarily disabled and unable to work, and must have been recertified for temporary disability every 15 days thereafter for the first 45 days following diagnosis.

Reporting Requirements

SB 1159 creates new reporting requirements for an employer. An employer who “knows or reasonably should know that an employee has tested positive for COVID-19” must report to its claims administrator the following information within three business days, via e-mail or fax:

  • The fact that an employee has tested positive. The employer shall not provide any personally identifiable information regarding the employee who tested positive for COVID-19 unless the employee asserts the infection is work-related or has filed a claim form pursuant to Labor Code Section 5401.
  • The date the employee tests positive—this is the date the specimen was collected for testing.
  • The address or addresses of the employee’s specific place(s) of employment during the 14-day period preceding the date of the employee’s positive test.
  • The highest number of employees who reported to work at the employee’s specific place of employment in the 45-day period preceding the last day the employee worked at each specific place of employment.

There are separate reporting requirements for positive tests between July 6, 2020 and up to September 17, 2020 (the date that SB 1159 took effect). If an employer became aware of an employee who tested positive during this period, the employer must have reported the information in the first three bullet points above, via e-mail or fax, to its claims administrator within 30 business days of September 17, 2020. However, instead of the last bullet point, the employer must report the highest number of employees who reported to work at each of the employee’s specific places of employment on any work date between July 6, 2020 and September 17, 2020.

The claims administrator will use the above information to determine whether an outbreak has occurred. Following these reporting requirements is crucial, as SB 1159 institutes a penalty of $10,000 for an employer that “intentionally submits false or misleading information or fails to submit information.”

What is an “Outbreak”?

Under Labor Code Section 3212.88, an outbreak exists if within 14 calendar days one of the following occurs at a specific place of employment:

  • If the employer has 100 employees or fewer at a specific place of employment, 4 employees test positive for COVID-19.
  • If the employer has more than 100 employees at a specific place of employment, 4% of the number of employees who reported to the specific place of employment test positive for COVID-19.
  • A specific place of employment is ordered to close by a local public health department, the state Department of Public Health, the Division of Occupational Safety and Health, or a school superintendent due to a risk of infection with COVID-19.

If there has been an outbreak, then the presumption of compensability is applicable. Recall, for the presumption to apply, the employee must test positive during an outbreak. Therefore, if there is no outbreak, there is no presumption.

Conclusion

Although much of the California workers’ compensation world was expecting that Governor Newsom’s Executive Order would be codified, there is some relief on the part of employers that were fearing the legislation would include an absolute presumption instead of a disputable one. For employers and claim administrators to take full advantage of this disputable presumption, the parties must work quickly and diligently to investigate each positive test and obtain evidence in all forms. As with the Governor’s prior Executive Order, this legislation should provide yet another incentive for employers to follow guidelines and to take all reasonable steps to keep their workforces safe and healthy as the state of California continues the process of re-opening.

DEALER IMPACT: This bill imposes important new obligations on dealers. The legislation provides that a “disputable presumption” will arise in certain circumstances where employees who suffer illness or death due to COVID-19 contracted Coronavirus on the job and that the injury is compensable through workers compensation. SB 1159 places on employers’ backs more responsibilities than simply the presumption that COVID-related claims are compensable.

The legislation also subjects employers to tight deadlines to reject COVID-19-related claims or suffer a further presumption in the employee’s favor. The employer only has 45 days to deny the claim (30 if the date of injury is on or before July 5, 2020). In the context of workers compensation, these deadlines are short fuses. Where an employer fails to reject a COVID-19-related claim on time, a presumption arises that the injury is compensable. The presumption may be rebutted, but only with evidence that the employer discovered after the deadline for rejecting the claim. The rights are based on an “outbreak” which has very detailed factors to determine whether an “outbreak” occurred.

The bill also includes mandatory quick and detailed reporting with hefty fines for non-compliance. This is important for dealers until at least January 1, 2023. Moreover, while the law went into immediate effect on September 17, 2020, it applies retroactively to illnesses that commenced even earlier. Under the new legislation, whenever an employer “knows or reasonably should know that an employee has tested positive for COVID-19,” the employer must within three business days report significant specified information to their workers compensation claims administrator about the Coronavirus-infected employee. The new statute requires that the employer send the report by email or fax.

EFFECTIVE DATE: September 17, 2020

Reference: Chapter 85, Statutes of 2020; SB 1159 (Hill, D-San Mateo).

Independent Contractor Issues

In 2019, the California legislature was debating AB 5 to address who the state considers to be an independent contractor. The law was based on an earlier ruling by the California Supreme Court in Dynamex Operations West v. Superior Court. In Dynamex, the court abandoned the previous test, known as the “Borello” test, which had focused on the right of the putative employer to control the activities of the worker. Instead, the court borrowed from the law of the state of Massachusetts and imposed the ABC test on California businesses. The court’s decision was limited to the state’s wage orders. Accordingly, it would have been possible for the same worker to be an employee for purposes of the wage orders, but a contractor for purposes of unemployment insurance, workers’ compensation, and other provisions of the Labor Code. The decision also was potentially retroactive, a question that is being litigated to this day. Accordingly, Dynamex left many questions unanswered and many in the California business community deeply concerned about the impact of the decision on their operations.

AB 5 was touted as a legislative “fix” to Dynamex. The law adopts the ABC test for determining whether a worker is a contractor or an employee for purposes not only of the wage orders, but also for unemployment insurance, workers’ compensation, and other provisions of the California Labor Code.

Under this ABC test, workers are presumed to be employees unless all three of the following conditions are met:

  1. The individual is free from control and direction in connection with the performance of the service, both under the contract for the performance of service and in fact; and
  2. The service is performed outside the usual course of the business of the employer; and
  3. The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

AB 5 then went on to list several “exceptions” where the former test, known as the Borello test, would be used to determine employee/contractor status. Borello focuses largely on the “A” prong – the right to control, but then also includes an evaluation of secondary factors, including whether the worker was engaged in a distinct occupation or business, or is integral to the business, the level of economic dependence the worker has upon the principal, the skill required in the particular occupation, and whether the worker or the hiring entity supplied the tools used to perform the work and the place where the work was performed.

It is worth noting that AB 5 uses approximately 130 words to describe the ABC test, and approximately 3,478 words to describe the exceptions. Not surprisingly, much of the debate around AB 5 centered on whether a particular business or occupation qualified for an exception.

AB 2257

Very early in the 2020 legislative session, just a few days after AB 5 became effective, legislators began introducing bills seeking to amend key provisions of the new law. At one point early in 2020, there were at least 31 different bills seeking to modify, or repeal, AB 5. Over time, those bills were distilled into a single vehicle: AB 2257.

AB 2257 makes several significant changes to AB 5. Primarily, AB 2257 modifies some of the current exceptions to AB 5 and introduces several new exceptions. The bill does not upset the existing framework of AB 5 – the ABC test remains in place, with exceptions for particular types of work, for which the prior test, Borello, is applied. While AB 2257 provides clarification on some issues relating to AB 5 and creates some flexibility with respect to referral agencies, it also creates new questions and still leaves unresolved several critical challenges emanating from AB 5.

Modified Exceptions to AB 5

Business-to-Business Exception

AB 5’s so-called “business-to-business” exception has been widely criticized by employment attorneys and business owners as unworkable. The test contains so many intertwined and overlapping requirements, that essentially many businesses in California simply gave up and did not try to shoehorn themselves into this exception. AB 2257 does attempt to clean up this exception, to a certain extent. The bill makes approximately nine different changes in the test, a few of which are highlighted below.

AB 5 includes the following requirement to qualify for the business-to-business exception:

  • The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

AB 2257 amends this as follows:

  • The business service provider can contract with other businesses to provide the same or similar services and maintain a clientele without restrictions from the hiring entity.

This change will allow for more flexibility in the application of the exception – a contractor need not actually have a contract with other businesses, it need only have the opportunity for such contracts. One of the most problematic sentences in AB 5’s business-to-business exception was the requirement that, in order to qualify for the exception and be able to use the Borello test, a business needed to show:

  • The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

This sentence left many questions unanswered and caused many to conclude that they did not qualify for the exception. For example, last-mile delivery services, which deliver goods to our homes: Are they the “customers” of the original business? It would seem so.

AB 2257 attempts to clarify this provision as follows:

  • The business service provider is providing services directly to the contracting business rather than to customers of the contracting business. This subparagraph does not apply if the business service provider’s employees are solely performing the services under the contract under the name of the business service provider and the business service provider regularly contracts with other businesses.

This could help in some business arrangements, but in the cases identified by the exception in the second sentence, workers will presumably be receiving W-2s, as they are “employees.” So, the possibility of using this carve out as a vehicle to upholding independent contractor status seems challenging. And, as with many provisions of the law, this is brand new language, completely untested and with no foundation in other parts of the California code. It is extremely challenging to predict how courts might interpret such new language.

AB 2257 also addresses another potentially troubling sentence from AB 5:

  • This subdivision does not apply to an individual worker, as opposed to a business entity, who performs labor or services for a contracting business.

Practitioners were, to put it mildly, confused by this sentence. It leaves many questions unanswered – for example, is a sole proprietorship an individual, or a business entity? The good news is that this sentence has been deleted.

The business-to-business exception in AB 5 also included the following language:

  • The determination of whether an individual working for a business service provider is an employee or independent contractor of the business service provider is governed by [the ABC test].

This sentence seems to show the intent of AB 5 to ensure that, at the end of the line, the ABC test is applied. But the sentence was criticized by employment and labor law practitioners as being unclear.

AB 2257 revises this to read:

  • When two bona fide businesses are contracting with one another under the conditions set forth in paragraph (1), the determination of whether an individual working for a business service provider is an employee or independent contractor of the business service provider is governed by [the ABC test].

This clarification appears to strengthen the argument that a business service provider itself may be a contractor, but that the persons working for that business service provider would be subject to the ABC test to determine their status.

AB 2257 makes several other changes to AB 5 that are not directly applicable to dealers, including the creation of new exemptions and a modification of the referral agency exception.

Public Enforcement

One of the notable provisions of AB 5 allowed for public enforcement – the state Attorney General or a city attorney in a city with a population in excess of 750,000 persons was empowered to bring an action for injunctive relief to prevent continued misclassification of workers.

AB 2257 expands this provision further, by allowing any district attorney in the state to bring such an action. This will allow involvement in the issue of independent contractor status by many more cities and elected officials.

DEALER IMPACT: AB 2257 modifies existing exceptions to AB 5 and creates new exceptions the presumption that workers are employees. These new exceptions to the ABC test include the following categories of workers that may affect auto dealers:

  • Individuals providing feedback to data aggregators (this might be useful with the data aggregators used to collect information for service warranty reimbursement under the new franchise law in effect that was sponsored by CNCDA)
  • Licensed landscape architects
  • Business-to-Business Exception. AB 5 included a convoluted so-called “business-to-business” exception

The bill attempts to clarify the exception and make it (relatively) easier to meet. Now, for a business service provider—like a warranty submission contractor or outside accounting services provider—to qualify for the exception, it need not actually have contracts with another dealership (or other company), as long as it has the opportunity for such contracts.

But the exceptions remain limited, with the new law expressly disqualifying from the exceptions to the ABC test several categories of workers that dealerships may utilize at times, including janitorial, delivery (e.g., dealer-trade drivers), courier, transportation, and retail (e.g., tent sales) workers.

Dealerships should be reminded that this is an area that is both high profile and rife with complicated exceptions where trying to navigate the danger alone is not advised. Dealerships should not categorize any person performing services for a dealer as an independent contractor without getting the advice of competent employment legal counsel before doing so.

EFFECTIVE DATE: September 4, 2020

Reference: Chapter 38, Statutes of 2020; AB 2257 (Gonzalez, D-San Diego).

Sweeping Expansion of Family Leave Law

SB 1383 expands the California Family Rights Act (CFRA) to cover smaller employers and provides access to leave for additional covered reasons. The expanded leave mandated under SB 1383 is enforced through a private right of action that includes compensatory damages, injunctive relief, declaratory relief, punitive damages, and attorney’s fees.

Current Law

The CFRA, like the federal Family and Medical Leave Act (FMLA), currently covers employers with 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year. Employees are eligible for CFRA leave if they have at least 12 months of service, worked at least 1,250 hours during the 12-month period prior to the commencement of the leave, and work at a worksite with at least 50 employees employed within 75 miles. Eligible employees may take up to 12 workweeks of leave in a 12-month period for the birth or placement of a child for adoption or foster care; the employee’s own serious health condition; or the serious health condition of the employee’s child, parent, spouse, registered domestic partner, or registered domestic partner’s child. If both parents are employed by the same employer and seek to take leave to bond with a new child, the employer may limit the parents to a combined total of 12 workweeks of leave. Unlike the FMLA, CFRA leave is not available for military exigencies, and pregnancy, childbirth, and related medical conditions are excluded from the definition of a serious health condition.

The California Fair Employment and Housing Act (FEHA), which applies to employers of five or more employees, separately provides employees disabled by pregnancy, childbirth, or a related medical condition with up to four months of pregnancy disability leave. The CFRA allows employers to deny reinstatement to a “key employee,” a salaried employee among the highest-paid 10 percent of the employer’s employees working within 75 miles of the employee’s worksite.

Currently, the New Parent Leave Act (NPLA) allows employees of smaller employers to take up to 12 workweeks of leave to bond with a new child if they have more than 12 months of service, worked at least 1,250 hours during the 12-month period prior to the commencement of the leave, work at a worksite with at least 20 employees employed within 75 miles, and are not covered under the CFRA and the FMLA.

Smaller Employers Now Covered

SB 1383 expands the definition of employers covered under the CFRA to any person who directly employs five or more persons. This change aligns the CFRA’s employer threshold with the employer threshold governing pregnancy disability leave under FEHA and eliminates the need for the NPLA, which is repealed effective January 1, 2021.

Additional Covered Family Members and Uses

SB 1383 adds to the list of family members for which employees may take CFRAleave grandparents, grandchildren, and siblings. The law also expands the definition of “child” to eliminate the requirement that the child be either under 18 years of age or an adult dependent.

SB 1383 also adds a new covered use, allowing eligible employees to take CFRA leave because of a qualifying exigency related to the covered active duty or call to covered active duty of an employee’s spouse, domestic partner, child, or parent in the Armed Forces of the United States, as specified in Section 3302.2 of the Unemployment Insurance Code.

These changes more closely align the CFRA with California’s Family Temporary Disability Insurance (FTDI) program, which provides up to eight weeks of paid family leave benefits to care for a seriously ill parent, child, spouse, registered domestic partner, grandparent, grandchild, sibling, or parent-in-law (including the parent of a registered domestic partner); to bond with a minor child within the first year of the child’s birth or placement for adoption or foster care; and, effective January 1, 2021, participate in a qualifying exigency related to the covered active duty or call to covered active duty of the individual’s spouse, domestic partner, child, or parent in the Armed Forces of the United States.

Other Changes

SB 1383 eliminates the CFRA’s limitation on the amount of leave parents may take to bond with a new child when both parents are employed by the same employer and an employer’s ability to deny reinstatement to key employees. This means that both parents get the full 12 weeks to bond without having to split it between them like before.

Additional Scenarios When State and Federal Leave May Not Run Concurrently

In addition to expanding the employers and uses to which CFRA will apply, SB 1383 creates additional occasions when a leave of absence under the CFRA may not run concurrently with leave under the FMLA such that an employee may “stack” the two leaves together and receive more than 12 workweeks of leave. For example, leave for pregnancy-related conditions will not run concurrently under the FMLA and the CFRA because pregnancy- related conditions are not covered under the CFRA. As a result, an eligible employee taking leave for a serious health condition related to pregnancy may receive up to 12 workweeks of FMLA leave without utilizing any of their CFRA entitlement. This potential for leave-stacking also exists when an employee takes CFRA leave to care for a domestic partner, which is not covered under the FMLA. Remember, however, that to be eligible for federal FMLA leave, an employee still must work at a business that employs 50 or more employees.

Under SB 1383, employees may also be able to stack federal and state leave benefi when an employee takes CFRA leave to care for a grandparent, grandchild, or sibling, as these family members are not covered under the FMLA.

DEALER IMPACT: Nearly all dealers (except those with four or less employees) will be obligated to provide eligible employees up to 12 weeks of unpaid family care and medical leave each 12 months, but will have to keep medical benefits in place on the same basis as though the employee were working. Also, for the first time, dealers will be required to grant family leave to employees to care for their ill grandparent, grandchild, or sibling instead of just a parent, child, and spouse/domestic partner.

The “key employee” exception is deleted from the new law.

This is a significant expansion of leave obligations for California dealers. Before denying any leave of absence for a medical or family care reason, and before denying any disability accommodation, dealers should seek the advice of competent employment legal counsel.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 86, Statutes of 2020; SB 1383 (Jackson, D-Santa Barbara).

Reforms to California’s Work Sharing Program

AB 1731 moves California’s work sharing program into the 21st century by mandating an online application process and specific deadlines for delivering claim forms. Work sharing is an unemployment insurance (UI) benefit program that gives employers the option of reducing employee hours during an economic downturn in lieu of layoffs. The employee receives a prorated UI benefit to replace the loss in wages.

Many economists believe that work sharing offers better options than layoffs. Participating employers get to keep trained employees and can recover more quickly when business financial conditions improve. Work sharing also avoids the costs associated with recruiting, hiring, and training new employees after layoffs. Employees get a prorated UI benefit and continued health and retirement benefits without having to look for other work.

The main drawback to California’s work sharing program has been the outdated manual process for applying and submitting claims. Until recently, the only way to apply for work sharing was to complete a paper form and send it to Employment Development Department (EDD) by U.S. mail. By law, EDD is supposed to approve or deny a work sharing application within 10 working days of receipt, but many employers reported significantly longer wait times after the pandemic started in March of 2020. Employers also complained of further delays caused by EDD’s failure to deliver the required claims forms on paper, which were unavailable online.

AB 1731 outlines several positive reforms to address these issues. First, the law requires the EDD to create an online portal for submitting work sharing applications. Second, all work sharing applications submitted between September 15, 2020 and September 1, 2023 are approved for one year unless a shorter period is requested. Third, the EDD must mail claim packets to an eligible employer for each participating employee within five business days following approval of a work sharing application. For employers that submit a work sharing application online, EDD must make online claim forms available to the approved employer for each participating employee within five business days following approval of the application.

Further, this new law gives the EDD the option to collaborate with the Governor’s Office of Business and Economic Development in the California Infrastructure and Economic Development Bank to develop and implement strategic outreach to increase employer participation in the work sharing program and to provide information to employers about their ability to rehire former employees, based on federal guidance.

AB 1731 benefits both employees and employers, making changes that will decrease the administrative burdens on employers and help reduce the time it takes to submit a claim. While the law moves in the right direction, many in the business community have asserted that more can be done, including updating EDD publications and FAQs to make it easier for employers and employees to understand the program requirements and application process from the outset. In addition, a fully automated online claims certification and submission process seems to be a logical next step. Finally, while the new “five business day deadlines” are an improvement, there are no stated consequences if EDD fails to comply. Since March of 2020, many employers that submitted applications did not receive timely notice of approval or denial from EDD in 10 working days as required by law. Work sharing can be an effective tool to prevent layoffs, but only if employers can obtain approval, employees can submit claims, and EDD can deliver benefits in a reasonable amount of time.

DEALER IMPACT: Participation by a dealer in a work sharing program can reduce unemployment liability if the dealer participates in a work sharing plan that meets specified requirements and has been approved by the Director of Employment Development. This allows the employer, in lieu of layoff, to reduce hours worked and stabilizes the workforce. Existing law requires an employer who wishes to participate in the work sharing program to submit to the director a signed, written work sharing plan application form that meets specified requirements. The new law makes this process electronic to speed up the submission and approval of plans for dealers that wish to participate in the work sharing program.

EFFECTIVE DATE: September 28, 2020

Reference: Chapter 209, Statutes of 2020; AB 1731 (Boerner Horvath, D-Encinitas).

Employee Compensation Data Collection

Under SB 973, California employers with 100 or more employees will be required to submit to the Department of Fair Employment and Housing (DFEH) a “pay data report” by no later than March 31, 2021, and annually thereafter. The pay data report must include a breakdown of employees by race, ethnicity, and sex in 10 broadly defined job categories. The report must further include a breakdown of employee compensation in one of 11 pay bands used by the United States Bureau of Labor Statistics in its Occupational Employee Survey, ranging from a low of “less than $19,239” to a high of “more than $208,000” again by race, ethnicity, and sex. Employers will use W-2 income for this reporting. Finally, employers must report total hours worked by each employee within a given pay band during the reporting year.

The bill provides that the report must include a section for employers to provide “clarifying remarks” although they are not required to do so. DFEH is authorized to publish annual reports containing aggregate data and provide copies of individual reports to the Division of Labor Standards Employment upon that agency’s request.

The state’s proposal mirrors the federal EEO-1 “Component 2” filing that employers were required to submit in 2019 to the U.S. Equal Employment Opportunity Commission (EEOC). The agency subsequently announced that it would discontinue this requirement, citing the cost of collection and the lack of utility of the data. EEOC’s expanded EEO-1 was the subject of significant criticism from the employer community. Critics noted that sorting workers into broad job categories does not indicate whether similarly situated employees are in fact performing substantially similar work. Similarly, the use of W-2 wages was criticized as being potentially misleading—W-2 wages reflect several choices employees make individually, ranging from decisions about overtime and premium shifts to elective deferrals such as 401(k) plan contributions.

It is fair to surmise that the elimination of the federal filing requirement led California to adopt this requirement under state law. In fact, Senator Hannah-Beth Jackson, who authored and introduced California’s Fair Pay Act back in 2015—which spurred a number of states to enact pay equity laws—introduced this bill in an effort to further address pay inequities based on gender, race, and ethnicity by encouraging employers to identify and correct their pay practices. Considering these upcoming reporting requirements, California employers may wish to consider auditing their current compensation systems to ensure they are paying workers appropriately, and to flag any potential pay equity issues sooner rather than later.

DEALER IMPACT: This new law has a significant impact on many California dealers. Dealers will now have to collect and report information on an annual basis to the State of California’s discrimination- enforcement agency. In essence, California dealers will be providing information each year that may become the basis for charges of discrimination filed against dealers based only on statistical data. Such “disparate impact” discrimination claims are increasingly common in dealership sales and finance departments, and this new reporting requirements will only accelerate this risk.

Dealers should immediately begin collect and analyzing this data so that by the time the March 31 annual data-submission deadline arrives, the dealership will be prepared not just to report the data, but to justify any apparent discrepancies, as well.

EFFECTIVE DATE: January 1, 2021. First pay data report will be due March 31, 2021

Reference: Chapter 363, Statutes of 2020; SB 973 (Jackson, D- San Diego).

Employers Receive One-Year Reprieve from Full California Consumer Privacy Act

AB 1281 extends the exemption for human resources data from most CCPA obligations to January 1, 2022. The exemption was previously set to expire on January 1, 2021.

CCPA’s Exemption for Human Resources Data

The CCPA exempts human resources data from all but two of its provisions. First, employers must provide HR Individuals (defined below) with a “Notice at Collection” when or before collecting their individually identifiable information (“personal information”). This notice must describe 1) the personal information the company will collect about these individuals, and 2) the purposes for which the company will use that information. HR Individuals means California residents in their capacity as applicants, employees, contractors, owners, directors, medical staff members, emergency contacts of the foregoing, and employees’ dependents or beneficiaries who receive company benefits.

Second, the CCPA grants HR Individuals, like other California residents, the right to recover up to $750 in statutory damages, on an individual or class-wide basis, from a company that breaches its human resources personal information due to a failure to implement reasonable safeguards.

The exemption for HR Individuals was originally set to expire on January 1, 2021, at which point HR Individuals would enjoy the rest of the rights that the CCPA provides to California residents.

For most employers, building a program to comply with these obligations would be a burdensome and time- consuming process. Companies typically must undertake a data-mapping exercise to identify all their repositories of HR Individuals’ personal information and the flow of that personal information into and out of the company. Based on the findings from the data-mapping exercise, the company must draft and publicly post an accurate privacy policy. To comply with data rights requests, a business needs to create an internal administrative structure to process the requests. Finally, companies often implement internal policies and procedures on handling the requests, including a suite of administrative forms.

The California Privacy Rights Act Ballot Measure and Continued Uncertainty

The “California Privacy Rights and Enforcement Act of 2020” (CPREA – Proposition 24) will appear on the November 2020 ballot. If passed by voters, the ballot measure would expand existing rights and provide additional rights to California residents with respect to their personal information. Notably, the CPREA would extend the exemption for HR Individuals’ personal information until January 1, 2023. However, on that date (January 1, 2023), HR Individuals would obtain the full rights of the CPREA.

DEALER IMPACT: This new law has little immediate need for action by dealers as it gives dealers more time to comply with the CCPA’s privacy requirements relating to applicants and employees (effectively extending the prior moratorium for employment-related privacy requirements for applicants and employees), except for some basic privacy notices and requirements for such individuals.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 268, Statutes of 2020; AB 1281 (Chau, D-Monterey Park).

California Makes Certain Human Resource Professionals and Supervisors Mandated Child Abuse Reporters

The California Child Abuse and Neglect Reporting Law, adopted in 1980, requires that certain “mandated reporters” make formal reports of suspected child abuse to law enforcement authorities. As defined in the law, child abuse includes acts and omissions constituting physical abuse, sexual abuse (including both sexual assault and sexual exploitation), willful cruelty or unjustified punishment, unlawful corporal punishment or injury, and neglect.

The law has been amended several times over the years, including by identifying additional groups of persons as mandated reporters. Now, effective January 1, 2021, certain California human resources professionals and front-line supervisors will also be identified as mandated reporters.

AB 1963 lists as mandated reporters of child abuse “human resources employees” working for businesses with at least five employees, that also employ minors. A human resources employee, as defined, is any employee designated by the employer to accept complaints of discrimination, harassment, retaliation, etc. made under California’s Fair Employment and Housing Act.

In addition, the law identifies as mandated reporters of sexual abuse front-line supervisors working for businesses with five or more employees, whose duties require direct contact with, and supervision of, minors. Note that supervisors are not mandated reporters of all types of child abuse, as defined, but only of sexual abuse.

Employers subject to the law are required to provide training to employees who have reporting duties under the law. The training must include training in both the identification and reporting of child abuse and neglect. The training requirement may be met by completing the general online training for mandated reporters offered by the Office of Child Abuse Prevention in the state Department of Social Services.

DEALER IMPACT: This new law impacts only those dealers who hire minors and supports CNCDA’s long-standing opinion that dealerships should not hire and/or employ minors. This new law would make Human Resources representatives and supervisors of minors mandatory reporters to law enforcement authorities for any suspected child abuse/molestation and neglect. It also imposes new training requirements on dealers who employ minors. Employing minors now opens a new set of requirements and obligations for dealers that employ minors.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 243, Statutes of 2020; AB 1963 (Chu, D-Milpitas).

Labor Commissioner Lawyers Can Now Represent Employees in Private Arbitration and Employers Must Notify the Labor Commissioner When Arbitration Is Sought

SB 1384 extends the authority of the California Labor Commissioner to represent a claimant who is financially unable to represent themselves in a hearing where a court order has compelled arbitration to determine the claim and the commissioner has determined that the claim has merit. The bill is intended to help employees who cannot afford an attorney to represent them in arbitration proceedings.

Under existing law, if an employee files a claim with the Labor Commissioner, the employee may present his/ her own case before the Labor Commissioner. If the Labor Commissioner finds in favor of the employee and the employer appeals to the Superior Court (referred to as a De Novo Appeal), Labor Code Section 98.4 permits the Labor Commissioner lawyers to represent the employee free of charge in the De Novo Appeal process. However, under prior law, the Labor Commissioner took the position that it could not provide free legal counsel to the employee if the employer pursued binding arbitration of the employee’s wage claims. The Labor Commissioner then used is lack of ability to represent employees free of charge in arbitration proceedings as a basis for arguing that arbitration was unfair to employees because they had to give up their free Labor Commissioner attorney if arbitration were enforced. Thus, courts used this unconscionability argument to deny arbitration.

SB 1384 will now allow the Labor Commissioner attorneys to represent employees free of charge in arbitration proceedings as well as before the Superior Court.

SB 1384 also requires that employers serve the Labor Commissioner with any petition to compel arbitration of a claim that is pending under Section 98, 98.1 or 98.2. Upon request of a claimant, the Labor Commissioner shall have the right to represent the claimant in proceedings to determine the enforceability of the arbitration agreement, notwithstanding whether the adjudication of the enforceability of the arbitration agreement is conducted in a judicial or arbitral forum.

DEALER IMPACT: While this might seem to negatively affect dealers, CNCDA does not believe the impact is adverse. That is because now that the Labor Commissioner can represent employees in binding arbitration, there is no argument that arbitration is unconscionable (unfair) to employees based on the lack of free representation; and so arbitration should be more readily compelled by courts. Also, Labor Commissioner attorneys tend to seek lesser attorney fee awards against employers than private attorneys when they are successful in recovering unpaid wages for employees. Dealers will have to make sure their legal counsel serves the Labor Commissioner on any petition to compel arbitration of a claim pending before the Labor Commissioner.

Effective Date: January 1, 2021

Reference: Chapter 239, Statutes of 2020; SB 1384 (Monning, D-Carmel).

Additional Impactful Wage and Hour Bills

As always, the legislature adopted various bills that impact California’s wage and hour laws. The following bills do not have a major impact on dealership operations. However, they are worth noting.

Wage and Hour

Law

Main Topic

Summary

Effective Date

AB 1512

Security Guards – Rest Breaks

Allows employer to require that security guards covered by collective bargaining agreements, paid at least one dollar more than minimum wage, remain on premises and on call during rest breaks.

January 1, 2021

AB 1947

Statute of Limitations for Wage/ Hour Discharge – Discrimination Complaints

Lengthens from six months to one year the statute of limitations for bringing a claim of discharge of discrimination in violation of any law under the jurisdiction of the Labor Commissioner.

January 1, 2021

AB 3075

Report of Wage and Hour Violations

Requires that corporations register with the state information regarding violations of the wage orders or Labor Code.

January 1, 2021

Additional Impactful Bills on Leaves of Absence

As always, the legislature adopted various bills that impact California’s laws on leaves of absence. The following bills do not have a major impact on dealership operations. However, they are worth noting.

Leaves of Absence

Law

Main Topic

Summary

Effective Date

AB 1867

Small Employer CFRA mediation

Coinciding with expansion of California Family Rights Act (CFRA) to small employers (SB 1383), creates Department of Fair Employment & Housing (DFEH) “small employer family leave mediation pilot program” for employers with between 5 and 19 employees.

September 9, 2020

AB 2017

Kin Care Leave

Provides that the designation of sick leave taken for kin care shall be made at the sole discretion of the employee.

January 1, 2021

AB 2399

Family Temporary Disability Insurance

Expands Family Temporary Disability Insurance (FTDI) program to include absences due to military service of family member.

January 1, 2021

AB 2992

Victim of Crime Leave

Expands leave for victims of domestic violence, sexual assault or stalking to include leave for the victim of any crime that caused physical injury or mental injury with a threat of physical injury.

January 1, 2021

Environmental/Hazardous Waste

Consolidated Manifesting Procedure

California law imposes various manifest requirements for transporting hazardous waste. AB 2920 authorizes a consolidated manifesting procedure to be used for specified retail hazardous waste, including consumer products such as bleach, cleaning products, and aerosol products.

DEALER IMPACT: It will likely become modestly easier and less expensive to dispose of certain types of hazardous waste that are commonly picked up at retailers throughout California.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 222, Statutes of 2020; AB 2920 (Obernolte, R-Hesperia).

Underground Storage Tanks – Loan and Grant Program Extension

California law provides the State Water Resources Control Board (SWRCB) with the authority to regulate underground storage tanks. Existing law empowers the SWRCB to conduct a loan and grant program to assist small businesses in upgrading, replacing, or removing tanks to comply with applicable standards. This program was set to expire on January 1, 2022.

AB 3220 extends the operation of the loan and grant program to January 1, 2026.

DEALER IMPACT: Dealers with underground storage tanks may now consider applying for the SWRCB grant and loan program until January 2026, instead of January 2022.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 296, Statutes of 2020; AB 3220 (Committee on Environmental Safety and Toxic Materials).

Privacy

California Consumer Privacy Act Modifications

Attorney General’s Office Regulations

As most dealers are aware by now, the California Consumer Privacy Act (CCPA) went into effect January 1, 2020, with penalties beginning to be enforced July 1, 2020. The law grants consumers a host of new rights with respect to personal information that businesses have collected about them and provides a private right of action for a consumer data breach that occurs as a result of the business’s violation of the duty to implement and maintain reasonable security procedures and practices appropriate to the nature of the information.

The Attorney General’s Office (AG) first issued proposed regulations on the CCPA in October 2019. Thereafter, the AG issued its first set of modified regulations in February 2020, second modified regulations in March 2020, and final proposed regulations on June 1, 2020.

Compared to the regulations initially proposed by the AG, the final regulations modify some CCPA compliance requirements, detailed as follows:

  • Notice at Collection of Personal Information: a business is no longer required to disclose the purpose for collecting each and every category of personal information identified in the Notice at Collection. Instead, the business may provide a general disclosure that gives consumers a meaningful understanding of the business purposes for collecting the consumers’ personal information.
  • Privacy Policy: a business is no longer required to provide detailed information for each and every category of personal information collected regarding the source and business purpose for collecting the information. Now, a business can provide a general disclosure about the source of personal information that is collected and the business purpose for collecting or selling it.
  • Response to Request to Delete: when a consumer submits a deletion request, the business’s response no longer needs to specify the manner in which it deleted the information. Instead, the business must simply inform the consumer whether it has complied with the consumer’s deletion request.
  • Processing Opt-out Requests: when a business receives an opt-out request, the business must honor the request, but is no longer required to send a communication to the consumer confirming that their opt-out request has been processed.
  • Timing Requirements: the initial response to requests to know and requests to delete must be provided within 10 business days; the full response to requests to know and requests to delete must be done within 45 calendar days. If needed, businesses can take an additional 45 calendar days, for a maximum total of 90 calendar days to respond to the requests; and requests to opt out must be processed no later than 15 business days from the date of receipt.
  • Accessibility Requirements: access for consumers with disabilities needs to follow generally recognized industry standards, such as those contained in the Web Content Accessibility Guidelines (WCAG), version 2.1 of June 5, 2018, from the World Wide Web Consortium.
  • Requests to Know About Specific Pieces of Personal Information Collected: biometric data has been added to the list of highly sensitive information that must NOT be disclosed if a consumer submits a request to know the specific pieces of information a business has collected about them. In addition, the final regulations explain that when a business has collected highly sensitive information, the business should explain the nature of the information it possesses regarding the consumer, without providing the specific details or an image of the sensitive information

Because the CCPA went into effect on January 1 and the penalty phase kicked in July 1, it is incumbent upon dealers to continue refining each dealership’s CCPA compliance strategy in response to the above changes in the law.

DEALER IMPACT: The California Consumer Privacy Act imposes significant responsibilities on dealerships regarding consumer data and privacy, so dealers should take seriously efforts to implement the provisions of the CCPA in their individual stores. Implementing the guidance in CNCDA’s CCPA Compliance Manual, drafted by the Arent Fox Law Firm, will help dealers create best practices and necessary documents and reduce their exposure in the event of a data breach.

EFFECTIVE DATE: January 1, 2020

Reference: California Code of Regulations, Title 11, Sections 999.300-999.337.

California Proposition 24

To add further uncertainty, consumer privacy advocates qualified Proposition 24 (called the “Consumer Personal Information Law and Agency Initiative”) for the November 2020 ballot. If voters approve the measure, it will expand the CCPA even further. Most notably for dealers’ purposes, the initiative would do the following:

  • Require that businesses provide consumers with the ability to opt out of having their sensitive personal information used or disclosed for advertising or marketing purposes;
  • Remove the time period in which businesses can fix violations before being penalized; and, perhaps most notably,
  • Create the California Privacy Protection Agency to implement and enforce the CCPA. This is an attempt to circumvent the lack of a private right of action contained in much of the CCPA, which instead depends on the California Attorney General’s Office for enforcement actions.

DEALER IMPACT: California voters chose to enact Proposition 24, resulting in a massive expansion of the California Consumer Privacy Act on dealerships, including the creation of a California Privacy Protection Agency whose sole job will be to enforce the CCPA on businesses.

EFFECTIVE DATE: January 1, 2023

Reference: Proposition 24 – Amends Consumer Privacy Laws. Initiative Statute, November 2020 ballot.

Fees and Taxes

Retirement Account Withdrawal Penalties – COVID-19 Exception

In March 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. One provision within the CARES Act allows individuals that were adversely affected by COVID-19 to make early withdrawals from their employer-sponsored retirement accounts of up to $100,000.

AB 276 makes conforming changes to California tax law, so that individuals that made early withdrawal from employer-sponsored retirement accounts for qualifying reasons under the CARES Act are not subject to California’s income tax.

DEALER IMPACT: Dealers and dealership employees that took early withdrawal from their retirement account for a qualifying reason under the CARES Act will not be subject to California’s income tax for withdrawals up to $100,000.

EFFECTIVE DATE: September 11, 2020

Reference: Chapter 62, Statutes of 2020; AB 276 (Friedman, D-Glendale).

Paycheck Protection Loan Forgiveness – Gross Income Exclusion

In March 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. One provision within the CARES Act creates the Paycheck Protection Program (PPP), which authorizes the creation of a forgivable loan program for small businesses impacted by COVID-19.

AB 1577 excludes from gross income, for state income tax purposes, any PPP loan amount forgiven pursuant to the CARES Act and subsequent related federal legislation. This change is effective for tax years beginning on or after January 1, 2020.

DEALER IMPACT: Dealers that received forgiveness for their PPP loans may be able to exclude the amount forgiven from their gross income for state income tax purposes.

EFFECTIVE DATE: September 9, 2020

Reference: Chapter 39, Statutes of 2020; AB 1577 (Burke, D-Inglewood).

Proposition 15 – Commercial and Industrial Property Tax

Proposition 15 amends the California State Constitution to require most commercial and industrial properties to be assessed and taxed based on market value. The change would be phased in beginning 2022-2023. Proposition 15 partially repeals Proposition 13 (1978), which limits property tax increases to 2% annually.

California estimates that, if approved, Proposition 15 would generate between $6.5 billion and $11.5 billion per year. Proposition 15 would distribute these funds to local governments and K-12 public schools, and community colleges.

DEALER IMPACT: If approved by voters, Proposition 15 would increase property taxes owed by dealerships throughout California. Dealers leasing commercial property may also see downstream impacts on their lease payment obligations. The amount of increase in taxes owed would vary based on the last time the property was assessed. Property that has not been assessed in many years (or decades) will likely see the greatest increase in assessed value, leading to the highest increases in taxes. If approved by voters, dealers should immediately consult competent counsel and/or their tax professional to determine the specific impact on their dealership.

EFFECTIVE DATE: January 1, 2022

Reference: Proposition 15 – Increases Funding for Public Schools, Community Colleges, and Local Government Services by Changing Tax Assessment of Commercial and Industrial Property. Initiative Statute, November 2020 ballot.

Used Vehicle Dealers – Sales Tax Reporting

Current law provides that taxes for vehicle sales are due and payable to the California Department of Tax and Fee Administration (CDTFA). Dealers pay these taxes quarterly and file a return that contains, among other information, the gross receipts of the dealership during the quarterly period.

AB 85 requires used vehicle dealerships to pay applicable sales tax to the Department of Motor Vehicles (DMV). The DMV would then remit the taxes to the CDTFA. AB 85 further imposes penalties on used vehicle dealers that fail to comply with this obligation. The DMV will adopt regulations to implement these provisions.

DEALER IMPACT: No direct impact to new motor vehicle dealers. Dealers operating used vehicle dealerships will remit sales tax to the DMV instead of the CDTFA. Draft DMV regulations (13 CCR 247.00) provide that many established used vehicle dealerships will need to comply with this obligation by January 1, 2023. Less established used vehicle dealerships, or used vehicle dealerships subject to enforcement actions, may be required to comply by January 1, 2021. Under the draft regulations, sales tax would be submitted to the DMV at the time of vehicle registration.

EFFECTIVE DATE: June 29, 2020. Requirements will be effective beginning January 1, 2021

Reference: Chapter 8, Statutes of 2020; AB 85 (Committee on Budget) and California Department of Motor Vehicles Used Vehicle Dealers – Sales Tax Proposed Regulations.

Tax Credits for Small Businesses Severely Impacted by COVID-19

AB 1447 allows certain small businesses to receive a $1,000 tax credit per employee hired during 2020 with a limit of $100,000 per employer.

Qualifying small businesses must have employed 100 or fewer employees as of December 31, 2019 and must have experienced a 50% decrease in gross receipts during the three-month period beginning on April 1, 2020 and ending on June 30, 2020 (compared to 2019).

DEALER IMPACT: Certain smaller dealerships that saw substantial revenue declines from April 1 through June 30 may qualify for a tax credit for hiring employees. Interested dealers should contact their tax professional to learn if the credit is applicable to their dealership.

EFFECTIVE DATE: September 9, 2020

Reference: Chapter 41, Statutes of 2020; SB 1447 (Bradford, D-Gardena).

Sales and Use Tax Cap Increase – Contra Costa County

California law authorizes cities and counites to impose sales and use tax in addition to the statewide amount. The additional amount that may be imposed by local government is generally limited to 2%. However, the legislature regularly adopts exceptions to this limit for specified local jurisdictions.

SB 1349 exempts transaction and use taxes imposed by the Contra Costa Transportation Authority and the San Francisco Bay Area Rapid Transit District from the tax limit for Contra Costa County.

DEALER IMPACT: Local transactions and use taxes may increase in Contra Costa County, and cities within Contra Costa County, if voters in these jurisdictions approve such tax increases. Dealers operating in these jurisdictions may be required to collect higher taxes in the future.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 369, Statutes of 2020; SB 1349 (Glazer, D-Orinda).

Department of Motor Vehicles Oversight

SB 115 contains provisions of the 2020 State Budget. This budget bill requires the Department of Motor Vehicles to provide monthly reports on office wait times, wait time ranges, window office hours, progress on hiring needed positions, and any technology outages in field offices.

The bill also requires the DMV to report to the Legislature on a bi-monthly basis the following:

  • Monthly status update reports.
  • Data for agreed-upon performance metrics.
  • An updated projection of the number of REAL IDs that the DMV estimates will need to be processed by October 1, 2021, the number of REAL IDs likely needing to be processed after October 1, 2021, through December 31, 2021, and the number of REAL IDs that have actually been processed to date.
  • How much additional money, if any, is needed to meet REAL ID workload demands, until the next reporting period or the end of the fiscal year, whichever is sooner.

DEALER IMPACT: The DMV has struggled with serious operational issues for years. Dealers should be aware of the legislature’s attempts to hold the DMV accountable on some major issues it continues to face.

EFFECTIVE DATE: September 9, 2020

Reference: Chapter 40, Statutes of 2020; SB 115 (Committee on Budget and Fiscal Review).

Business Operations

New Department of Financial Protection and Innovation

Existing law establishes the Department of Business Oversight in the Business, Consumer Services, and Housing Agency, which is charged with the execution of specified laws relating to various financial institutions and financial services, including banks, trust companies, credit unions, finance lenders, and residential mortgage lenders.

AB 1864, largely modeled after the federal Consumer Financial Protection Bureau, renames the Department of Business Oversight as the  “Department  of  Financial  Protection  and  Innovation”  (DFPI)  and expands the Department’s authority by putting it in charge of enforcing all state laws relating to “persons offering or providing consumer financial products or services” – it even attempts to give the DFPI nonexclusive oversight and enforcement authority under federal consumer financial laws. Despite the multitude of existing California regulatory agencies with oversight over the state’s businesses, according to the findings in AB 1864 the bill was necessary because there is no dedicated financial services regulator with broad authority over providers of financial products and services “which leaves consumers open to abuse.”

The DFPI will have broad jurisdiction over entities that previously were not licensed by the DBO, but businesses who are already subject to regulatory oversight are not supposed to be covered by the new proposal so long as they are “acting within the scope of their license.” According to statements made by the existing DBO Commissioner during a legislative hearing, franchised new car dealers are not covered under the purview of the DFPI because dealers are already licensed by the Department of Motor Vehicles and Department of Consumer Affairs’ Bureau of Automotive Repair.

AB 1864 also enacts the California Consumer Financial Protection Law (CCFPL), which is largely modeled after the federal Dodd–Frank Wall Street Reform and Consumer Protection Act, to strengthen consumer protections and increase regulatory oversight of various financial service providers. Franchised new car dealers were specifically excluded from the purview of Dodd-Frank since its enactment in 2010.

The bill makes it unlawful for covered persons or service providers to, among other acts, engage in unlawful, unfair, deceptive, or abusive acts or practices with respect to consumer financial products or services, or offer or provide a consumer a financial product or service that is not in conformity with any consumer finance law. In terms of enforcement, the DFPI will have the power to bring administrative and civil actions, issue subpoenas, promulgate regulations, hold hearings, issue publications, conduct investigations, and implement outreach and education programs. Specific civil and monetary penalties, as well as injunctive relief, will be imposed for violations of the CCFPL. The DFPI will coordinate with the Attorney General regarding civil and investigatory actions.

Fees, fines, and penalties collected by the Commissioner under the CCFPL will be deposited into the Financial Protection Fund, which will be used for the administration of the CCFPL.

The Legislature will be required to conduct public hearings to obtain input on feasibility, and the Commissioner must annually appear before the Legislature to present information on enforcement actions and various other activities under the CCFPL. The DFPI will also prepare an annual report containing specified information and publish this report on its website.

DEALER IMPACT: Although the current DBO Commissioner stated that dealers are not covered under the purview of the DFPI due to their licensure with the DMV and BAR, the DFPI will likely try to exploit loopholes within the bill’s language to investigate and penalize dealers that they claim are not “acting within the scope of their license” in any given circumstance. Dealers need to be aware of this new state regulatory agency modeled after the federal Consumer Financial Protection Bureau with broad enforcement authority.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 157, Statutes of 2020; AB 1864 (Limón, D-Santa Barbara).

Vehicle Sales and Lease Documents – Physical Retention Periods

The DMV requires dealers to physically maintain all original business records related to the purchase, sale, rental, or lease of a vehicle at a dealership’s principal place of business. For transactions that take place at a dealership’s branch location, the records may instead be maintained at the branch location.

In 2020, the DMV adopted regulations that reduce the requirement to physically maintain such documents from 18 months to 90 days. Following the initial 90-day storage period, dealers may store the documents electronically.

DEALER IMPACT: Dealers may now destroy physical copies of documents related to vehicle sales and lease transactions after 90 days if electronic copies are securely maintained. Dealers should also note that total retention periods for documents related to the purchase, sale, rental, or lease of vehicles are much longer than 90 days. The DMV requires a 3-year retention period for such documents, but other laws impose longer requirements. For a more detailed discussion on retention requirements, see CNCDA’s Dealer Management Guide. [https://www.cncda.org/publications/dealer-management-guide/]

EFFECTIVE DATE: October 1, 2020

Reference: California Code of Regulations, Title 13, Section 272.02.

Towing and Storage Costs – Liability of Prior Owner

California law provides that the registered owner of a vehicle is responsible for all harm caused, and fees incurred, by that vehicle. The Vehicle Code provides three means by which a former vehicle owner can avoid liability when a subsequent owner failed to re-register that vehicle after the sale. However, the Civil Code contains narrower provisions for a former owner to eliminate liability. This disconnect between the Vehicle Code and Civil Code can result in situations where prior owners of a vehicle are sued for towing and storage costs incurred by subsequent owners.

AB 2319 harmonizes the disconnect between the Vehicle Code and Civil Code provisions regarding the release from liability for former vehicle owners. As a result, if a prior owner takes proper steps under the Vehicle Code to release themselves from liability, they will also avoid a deficiency judgment for a vehicle they no longer own.

DEALER IMPACT: Prior vehicle owners will find it easier to shield themselves from liability arising out of a towing or storage debt incurred by a current vehicle owner.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 50, Statutes of 2020; AB 2319 (Berman, D-Menlo Park).

Foreign Language Translations – Signatories to Vehicle Sales and Lease Contracts

California law requires certain businesses (including dealerships) to provide translated copies of certain contracts (including vehicle sales and lease contracts), when the contract was primarily negotiated in one of five specified foreign languages. These languages are Spanish, Chinese, Tagalog, Vietnamese, and Korean.

AB 3254 expands the translation requirement so that a business that negotiates a specified contract in one of the five above-mentioned languages must provide a translated contract or agreement to any person signing the contract, not just the parties to the contract.

DEALER IMPACT: Under current law, dealers must provide a translated copy of a vehicle sales or lease agreement when the transaction was primarily negotiated in Spanish, Chinese, Tagalog, Vietnamese, or Korean. Now, non-party signors to the contract (such as cosigners and guarantors) must receive a translated copy, in addition to the buyer.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 161, Statutes of 2020; AB 3254 (Limón, D-Santa Barbara)

Debt Collectors – License Requirement

California and federal law impose various restrictions on debt collection, including the prohibition of deceptive, dishonest, unfair, and unreasonable debt collection practices.

SB 908 requires the licensure of persons that regularly engage in the business of debt collection in California. Licensed debt collectors will be regulated by the Department of Financial Protection and Innovation (DFPI). SB 908 instructs the DFPI to immediately take actions necessary to prepare for this licensure requirement. Debt collectors must be licensed by January 1, 2022.

DEALER IMPACT: Generally, dealership employees would not be considered “debt collectors” subject to licensure requirements. However, if a specific employee (or employees) is tasked with regularly collecting consumer debt, they may be required to be licensed beginning January 1, 2022. Dealers that have questions about the application of this law are encouraged to contact competent counsel.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 163, Statutes of 2020; SB 908 (Wieckowski, D-Fremont).

Corporate Board of Directors – Underrepresented Communities

California law requires publicly held corporations whose principal executive office is in California to have a minimum number of female directors on their board.

AB 979 requires, no later than the end of the 2021 calendar year, such corporations to have a minimum of one director from an “underrepresented community.” No later than the end of the 2022 calendar year, such a corporation may be required to have 2 or 3 members of their board to be from underrepresented communities, depending on board size. “Director from an underrepresented community” means an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.

DEALER IMPACT: Some dealerships are owned by publicly held corporations. Such corporations may be required to observe new diversity requirements on their board of directors.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 316, Statutes of 2020; AB 979 (Holden, D-Pasadena).

Prevailing Wage Law – Public Subsidy Definition

California law requires the payment of wages at not less than the “prevailing rate” for projects that receive public subsidies. These higher wages generally increase the cost of construction for such projects.

AB 2231 codifies and expands on existing rulings by the Department of Industrial Relations on what constitutes a “de minimis” amount of public funds, thereby not triggering prevailing wage requirements. AB 2231 provides that a public subsidy is de minimis if it is both less than $600,000 and less than 2% of a total project cost.

DEALER IMPACT: Dealers that are receiving incentives or other public subsidies to construct facilities should carefully review California prevailing wage law, including the de minimis standard in AB 2231, to determine whether the law applies to their construction project.

EFFECTIVE DATE: July 1, 2021

Reference: Chapter 346, Statutes of 2020; AB 2231 (Kalra, D-San Jose).

Digital License Plates Pilot Program

Current law allows the DMV to conduct a pilot program to evaluate alternatives to vehicle license plates, registration stickers, and registration cards until January 1, 2020. The only company to apply to participate in the pilot program is a company called Reviver that offers digital license plates that interact with the cloud. Some California dealers have participated in this pilot program.

AB 2285 extends the existing pilot program to January 1, 2023.

DEALER IMPACT: Dealers should be aware of the continued opportunity to participate in the DMV’s digital license plate pilot program.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 100, Statutes of 2020; AB 2285 (Committee on Transportation).

Zero-Emission Vehicles

Governor Newsom Executive Order to Ban the Sale of New ICE Vehicles by 2035

On September 23, 2020, Governor Gavin Newsom signed an Executive Order directing the California Air Resources Board (CARB) to enact regulations to require all new cars and passenger trucks sold in California to be zero-emission by the year 2035.

According to Governor Newsom, this action is necessary to combat climate change. In a statement, Governor Newsom said internal combustion vehicles are the target because the transportation sector is responsible for more than half of all of California’s carbon pollution, 80 percent of smog-forming pollution, and 95 percent of toxic diesel emissions, and this mandate would result in more than a 35 percent reduction in greenhouse gas emissions and an 80 percent reduction in nitrogen oxide emissions from cars statewide.

In the Executive Order, CARB was also directed to develop regulations mandating all medium- and heavy-duty vehicles to be 100 percent zero emission by 2045 “where feasible”. To support the infrastructure that will be necessary to support the mandate, the order requires state agencies, in partnership with the private sector, to accelerate the deployment of charging options. It also requires support of new and used zero-emission vehicle markets to provide broad accessibility to zero-emission vehicles for all Californians, although it is unclear what form that support would take.

While the Executive Order will not prevent Californians from owning gasoline-powered cars or from selling them on the used car market, this transition would have a massive impact on California’s new car dealers, as zero- emission vehicles remain a small percentage of the nearly two million new vehicles sold in California each year.

The federal Environmental Protection Agency (EPA) immediately responded to news of the Executive Order by warning Governor Newsom that the Executive Order “raises serious questions regarding its legality and practicality.”

This summary was prepared in late October 2020. If President Trump remains in office after the November 2020 elections, any action by CARB will likely be attacked by the EPA. However, if there is a change in presidential administration, it is unlikely CARB will be challenged.

DEALER IMPACT: The State of California continues to push the sale and widespread adoption of zero- emission vehicles through goals and now mandates. If CARB adopts regulations to implement a 2035 ban on the sale of all new internal combustion engine vehicles, this mandate will have a drastic impact on dealerships statewide in sales departments and service departments, and could result in out-of-state dealerships having an unfair competitive advantage over California dealers.

EFFECTIVE DATE: CARB regulations have not been adopted yet but will likely considered in 2021; the Executive Order requires implementation by 2035 with a possible tiered phase-in.

Reference: Governor Gavin Newsom Executive Order N-79-20 dated September 23, 2020.

California Clean Fuel Reward Program

The California Clean Fuel Reward is a consumer incentive of up to $1,500 (amount depends on vehicle battery size) that applies to the purchase or lease of eligible new battery electric or plug-in hybrid vehicles at participating dealers. The incentive is available statewide, regardless of customer utility area, and can be combined with existing post-sale local, state, and federal incentives.

Participating dealers will submit claims and receive post-sale reimbursement through a Clean Fuel Reward online portal. The program also includes online electric vehicle marketing kits for use by participating vehicle manufacturers and dealers, virtual instructor-led training on how to submit claims, and training on all electric vehicle incentives, tax credits, and charging equipment offers available. Dealer enrollment began on October 27, 2020 and consumers started being able to utilize the program in mid-November.

DEALER IMPACT: Consumer rebates are vital to support the State of California’s increasing push to accelerate the widespread adoption of zero-emission vehicles. Dealers should be aware of this new program and should sign up to be participating dealers so that they can offer the rebate as an incentive to customers for the purchase of select battery electric and plug-in hybrid vehicles.

EFFECTIVE DATE: July 1, 2020. Rebate became effective beginning mid-November 2020

Reference: California Code of Regulations, Title 17, Sections 95480-95503.

Clean Vehicle Rebate Project

As part of the state’s Air Quality Improvement Program, the California Air Resources Board (CARB) has established the Clean Vehicle Rebate Project (CVRP). This program aims to promote the purchase of zero- emission vehicles by providing customer rebates of up to $7,000 for the purchase or lease of eligible new zero- emission and plug-in hybrid vehicles.

Current law places specified income caps on rebate applicants, increases rebate payments by $500 for low- income applicants, and prioritizes rebate payments for low-income applicants. Program changes implemented in December 2019 made the following additional changes to the program:

  • Require rebate applicants to submit a CVRP application prior to exhaustion of available rebate funds.
  • Require rebate applicants to submit a CVRP application within 3 months of the vehicle purchase or lease date.
  • Vehicles must have an all-electric range of 35 miles or more to be eligible for the program.
  • Vehicles must have a base Manufacturer Suggested Retail Price (MSRP) of $60,000 or less to be eligible for the program.
  • Individual and business applicants are now ineligible to receive more than one CVRP rebate.

DEALER IMPACT: Dealers should be aware of modifications to the Clean Vehicle Rebate Project to best assist customers purchasing or leasing new eligible zero-emission and plug-in hybrid vehicles.

EFFECTIVE DATE: December 3, 2019

Reference: California Air Resources Board Fiscal Year 2019-20 Funding Plan for Clean Transportation Incentives for Low Carbon Transportation Investments and the Air Quality Improvement Program approved by CARB members on October 24, 2019.

Clean Air Vehicle Decals

Californians who drive vehicles that meet certain emissions standards and other criteria may be able to apply for Clean Air Vehicle (CAV) decals and CAV decal identification cards, which allow single occupancy use of High Occupancy Vehicle (HOV, or carpool) lanes.

All CAV decals are issued to the vehicle, not the individual person/vehicle purchaser, and must remain with that vehicle. CAV decals cannot be transferred to any other vehicle. If a vehicle purchaser buys or leases a vehicle that has an existing CAV decal, the purchaser must transfer the vehicle decal to his or her name.

Each year the DMV will establish a new CAV decal color. The colors for future decals have not yet been determined. Future CAV decals will expire on January 1st of the fourth year after the year they are issued. This provides an access period of three full years plus the partial year from when the decal was issued. For example, if a decal was issued anytime in 2020, it expires January 1, 2024.

The CAV decal program will end, and any remaining valid decals will expire, on September 30, 2025.

For vehicles purchased or leased on or after January 1, 2018, a CAV decal cannot be issued if the vehicle purchaser or lessee has received a consumer rebate through the Clean Vehicle Rebate Project (CVRP), unless the vehicle purchaser or lessee meet specific gross annual income requirements. If gross annual income is above specific thresholds, the vehicle purchaser or lessee must choose between a CAV decal and a CVRP rebate.

White and Green Decals
White and green CAV decals have been discontinued as of January 1, 2019 and are no longer valid for HOV lane access or issued by the DMV.

Red Decals
Vehicle owners who were issued white or green decals from January 1, 2017 to December 31, 2018 and who were eligible for the red decal were mailed a pre-filled REG 1000 application form with instructions and a return envelope in October 2018. Red decals are valid until January 1, 2022.

Purple Decals
The DMV stopped issuing red decals on December 31, 2018 and began issuing purple decals on January 1, 2019. The purple decals will expire on January 1, 2023.

Orange Decals
The DMV stopped issuing purple decals on December 31, 2019 and began issuing orange decals on January 1, 2020. Orange decals are for first-time applications only and will expire on January 1, 2024.

Future Color
The DMV will stop issuing orange decals on December 31, 2020 and begin issuing different colored decals on January 1, 2021 (color has not been decided yet).

Low-Income Exception

SB 957 (Chapter 367, Statutes of 2018) established an income-based CAV decal program authorizing the DMV to issue CAV decals valid from January 1, 2020 through January 1, 2024 to vehicles that were issued a CAV decal prior to January 1, 2017 if the new registered owner’s gross annual household income is at or below 80 percent of the state median income. For the purposes of this program, the statewide median income is subject to change every fiscal year (July through June).

The Income-Based Clean Air Vehicle Decal Program application form (REG 1000 IB, REV. 10/2020) was recently revised to reflect the state’s new median income of $69,680. Due to the current pandemic, implementation of the new median income level was delayed and began to be enforced on October 1, 2020.

DEALER IMPACT: If a dealer sells a customer a vehicle that already has an HOV decal, the customer should submit a REG 1000 form and submit it to the DMV in order to transfer the decal ownership into his or her name. This can only be done after the DMV transfer of vehicle ownership is complete. There is no cost provided that all required CAV decals are present on the vehicle. If the vehicle is eligible for a new decal, the customer will be issued a new CAV decal ID card with their name once the CAV decal transfer application is processed. In addition, dealers should be aware that beginning January 1, 2020 certain customers who purchase a vehicle with an expired Clean Air Vehicle decal may be able to obtain a new Clean Air Vehicle decal for that vehicle. To determine whether a used vehicle is eligible for a new CAV decal, customers can call the DMV at 916-657-8035 to determine the vehicle’s eligibility.

EFFECTIVE DATE: January 1, 2020 (orange stickers) and January 1, 2020 (income exception)

Reference: Chapter 367, Statutes of 2018; SB 957 (Lara, D-Bell Gardens).

Advanced Clean Trucks Regulations

In 2016, CARB first proposed its Advanced Clean Trucks Regulation to try to accelerate a large-scale transition of medium-and heavy-duty vehicles from Class 2B to Class 8 to zero-emission. The proposal was approved by CARB members on June 25, 2020. The regulation has two components: (1) a manufacturer ZEV sales requirement, and (2) a one-time reporting requirement for large entities and fleets.

Under the manufacturer sales requirement, manufacturers who certify Class 2B-8 chassis or complete vehicles with combustion engines will be required to sell zero-emission trucks as an increasing percentage of their annual California sales from 2024 to 2035. By 2035, zero-emission truck/chassis sales would need to be 55% of class 2b-3 truck sales, 75% of class 4 – 8 straight truck sales, and 40% of truck tractor sales.

Pursuant to the reporting requirement, large businesses including retailers, manufacturers, brokers, and others will be required to report specified information about shipments and shuttle services. Covered businesses include:

  • Entities with more than $50 million in gross annual revenue (including revenue from all subsidiaries, subdivisions, or branches) with facilities in California that own one or more vehicles with a gross vehicle weight rating (GVWR) over 8,500 pounds
  • Large fleets that own 50 or more vehicles with a GVWR over 8,500 pounds with facilities in California

Requested information includes:

  • The number of entities with whom the business had a contract to deliver items or to perform work in California using vehicles with a GVWR over 8,500 pounds in 2019 or 2020.
  • The number of subhaulers the dealership contracted with in California to transport vehicles or other property.
  • Estimated number of vehicles operated by subhaulers on the dealership’s behalf in California.
  • The number of vehicles with a GVWR over 8,500 pounds the dealership owned and operated in California in either 2019 or 2020 that do not have a vehicle home base in California.

Complete information must be submitted online through CARB’s Advanced Clean Trucks website by April 1, 2021 (the reporting portal is not live as of publication date). In advance of the reporting deadline, CARB will release a spreadsheet reporting template that affected dealerships will fill in. Once complete, the dealership will upload the spreadsheet onto CARB’s Advanced Clean Trucks website.

DEALER IMPACT: California dealerships with more than $50 million in gross annual revenue that own one or more vehicles with a gross vehicle weight rating over 8,500 pounds must report specified information about heavy-duty vehicle fleets to CARB by April 1, 2021.

EFFECTIVE DATE: The regulations have not yet received final approval from the Office of Administrative Law and details are still being finalized through CARB implementation workshops

Reference: California Code of Regulations, Title 13, Sections 1963-1963.5 and 2012-2012.2.

Zero-Emission Programs and Investments

California Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program

The California Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program funds zero- and near- zero-emission truck, bus, and off-road vehicle and equipment technologies and related projects. The program provides that projects eligible for funding include technology development, demonstration, precommercial pilots, and early commercial deployments of zero- and near-zero-emission medium- and heavy-duty truck technology. The program requires at least 20% of funding to support early commercial deployment of existing zero- and near- zero-emission heavy-duty truck technology until December 31, 2020.

AB 2285 extends the requirement that 20% of that funding be made available for that same purpose until December 31, 2021.

State Energy Resources Conservation and Development Commission

Existing law requires the State Energy Resources Conservation and Development Commission to provide technical assistance and support for the development of petroleum diesel fuels that are as clean or cleaner than alternative clean fuels and clean diesel engines.

SB 895 instead requires the Commission to provide technical assistance and support for the development of zero-emission fuels, zero-emission fueling infrastructure, and zero-emission fuel transportation technologies.

Public Utilities Commission

Existing law requires the Public Utilities Commission to approve programs and investments in transportation electrification, including those that deploy charging infrastructure, if they do not unfairly compete with nonutility enterprises, include performance accountability measures, and are in the interests of ratepayers.

AB 841 requires no less than 35% of the transportation electrification investments pursuant to these provisions to be in underserved communities.

DEALER IMPACT: Dealers should be aware of California’s many initiatives to accelerate the adoption of zero-emission vehicles, with an increasing focus on underserved communities in the state.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 100, Statutes of 2020; AB 2285 (Committee on Transportation), Chapter 120, Statutes of 2020; SB 895 (Archuleta, D-Pico Rivera), and Chapter 372, Statutes of 2020; AB 841 (Ting, D-San Francisco).

2020 Electric Vehicle Supply Equipment Regulations

Electric vehicle fueling systems/electric vehicle supply equipment (EVSE) used for commercial purposes are subject to regulation adopted by the California Department of Food and Agriculture Division of Measurement Standards.

This regulation provides for California’s adoption of standardized national EVSE requirements and requires businesses that own or operate commercial retail EVSE to register each device with the local county office of weights and measures.

DEALER IMPACT: Dealers that own and operate commercial retail electric vehicle supply equipment must register each device with the local county office of weights and measures.

EFFECTIVE DATE: April 1, 2020

Reference: California Code of Regulations, Title 4, Section 12107.

Lithium Extraction

The State of California has made it a priority to transition the state away from oil extraction activities. As part of that attempt, the government would like to transition energy extraction efforts from oil and gas to lithium in part to support the increased production of lithium-ion batteries used in, among other products, electric vehicles.

AB 1657 requires the State Energy Resources Conservation and Development Commission, on or before March 1, 2021, to establish and convene the Blue Ribbon Commission on Lithium Extraction in California. The Blue Ribbon Commission will review, investigate, and analyze certain issues and potential incentives regarding lithium extraction and use in California and submit a report to the Legislature by October 1, 2022 documenting its findings and recommendations.

DEALER IMPACT: Dealers should be aware of California’s efforts to transition the state away from oil and gas production and toward the extraction of lithium, an essential component of electric vehicle batteries.

EFFECTIVE DATE: January 1, 2021

Reference: Chapter 271, Statutes of 2020; AB 1657 (Garcia, D-Coachella).

Major COVID-19 Legal Developments in 2020

This year has been dominated by the Coronavirus pandemic. In response to the pandemic, federal, state, and local lawmakers adopted a series of new laws, orders, and health regulations, most of which became effective immediately. Some of the most impactful laws include:

  • The federal Families First Coronavirus Response Act (FFCRA), which created unprecedented paid leave requirements for employers with fewer than 500 employees.
  • The federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which created the Paycheck Protection Program (PPP) and provided substantial aid to many Americans (particularly the recently unemployed).
  • California’s COVID-19 Industry Guidance for Automobile Dealerships, which outlines required operational practices for California dealerships during the pandemic.
  • California’s COVID-19 Employer Playbook, which details how California businesses are expected to respond to COVID-19 exposure and educate their workforce.

Since March 2020, CNCDA has extensively covered these COVID-19 legal developments through alerts, webinars, and compliance materials, which are accessible on our website (www.cncda.org) under the “CNCDA Comply” tab. As such, these laws are not discussed in detail in this legislative summary. Instead, this legislative summary is primarily intended to inform you about legal developments that stem from enacted bills from California’s 2020 legislative session and regulatory actions affecting new car dealers this year.

2020 Legislative Summary

Dear Fellow CNCDA Member,

As CNCDA Chairperson, I am pleased to present you with our 2020 Legislative Summary. This summary demonstrates the commitment of CNCDA, its leadership, and its members statewide to protect the automotive retail industry through an active and engaged legislative process.

2020 has been an unprecedented year, and far from traditional in every sense of the matter, including our lobbying and advocacy efforts. As dealerships were forced to suspend or reduce operations in the Spring and then comply with ever-changing operations requirements, we adjusted to the changing political environment with reduced bill loads, cancelled hearings and experienced an end of session legislative rush like no other. That said, despite all the changes this year has brought, I am incredibly proud of the engagement and attention you provided on critical legislative issues that we, the dealer body, needed to get behind.

With consistent participation and dedication from dealers across the state, coupled with strong guidance from CNCDA leadership, we were able to defeat AB 326, a bill that would have had severe implications on the dealer franchise system and challenged the very way we each do business. Your support and engagement were critical and made the difference every step of the way. Thank you.

Even though the Legislature had a narrower focus this year that was largely limited to COVID-19 and urgency bills, policymakers still passed many new laws and introduced proposals that demand your attention, including topics such as: the Governor’s Executive Order urging a ban of the sale of non-zero emission vehicles by 2035, consumer privacy, fees and taxes, and employment and related health requirements. This 2020 Legislative Summary covers each of these critical areas and prepares you and your dealership employees for compliance as you head into 2021.

As CNCDA continues to communicate, the best form of advocacy is done through all our dealer members. Your contribution to local communities through economic, employment, and philanthropic channels are second to none and your stories remain incredibly compelling with policymakers. Maintaining those relationships with local legislators is critical in addition to continuing to act in Sacramento. Please be sure to join us next year for CNCDA’s Annual Dealer Day on April 21, 2021 for the opportunity to talk to lawmakers, share your personal stories and urge them to continue supporting franchised new car dealers by creating a business-friendly environment for dealers across the state.

Thank you for your continued support statewide and locally. Your engagement continues to help protect the future of the industry and California’s dealer franchise system.

Sincerely,

Mark Normandin

Normandin Chrysler Jeep Dodge Ram FIAT Chairperson, CNCDA

2019 Legislative Summary

CNCDA is working to continuously provide our members with the most up to date information on the coronavirus as it pertains to dealerships.

Visit our Dealership Coronavirus Resources webpage for more information.

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