New laws for 2016

Effective January 1, unless indicated otherwise

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With the New Year comes a host of new obligations for businesses. Here are the highlights...

Employment-related laws

Industrial Welfare Commission Order MW-2014

The current minimum wage of $9.00 per hour will increase to $10.00 per hour effective January 1, 2016. The minimum wage increase also raises the minimum salary that must be paid to an employee to qualify under a white collar exemption, raises the minimum regular hourly rate threshold for an employee to qualify under the commission sales exemption, and raises the minimum hourly rate paid to employees who are required to provide their own tools for work. Some local ordinances impose higher minimum wage rates.

SB 358: Gender Wage Differential

Existing law: Employers are prohibited from paying an employee a wage rate that is less than that paid to an employee of the opposite gender in the same establishment for equal work on jobs requiring equal skill, effort and responsibility and which are performed under similar working conditions.

Changes from this law: The new law provides that the employer must demonstrate non-gender-related reasons for any pay differential between opposite-gender employees for the same position. This requirement is no longer limited to pay rates in one establishment. Rather, all establishments owned by the employer must be included in the analysis of opposite gender pay rates/structure. Employers have the burden to affirmatively demonstrate that a wage differential is based on one or more specified factors, and that the factors relied upon are applied reasonably and account for the entire differential. Allowed factors include:

  • A seniority system,
  • A merit system,
  • A system that measures earnings by quantity or quality of production, or
  • A bona fide factor other than sex, such as education, training, or experience that is job related with respect to the position in question, and consistent with a business necessity.

The law also prohibits discrimination or retaliation against an employee for invoking or assisting in any manner the enforcement of its provisions, and provides for a civil action for reinstatement and reimbursement for lost wages and work benefits, as well as interest and appropriate equitable relief.

Under this bill, an employer cannot prohibit an employee from disclosing the employee’s own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his/her rights under this law. The employer’s recordkeeping requirements are also increased from 2 to 3 years.

Action needed: Employers should audit their pay records for each position to determine whether a wage differential exists for opposite gender employees. If a wage differential exists, the employer should determine whether an exception applies that justifies the entire differential and whether the differential is reasonable under those circumstances. Additionally, employers should update their non-retaliation and confidentiality policies.

SB 579: Employee time-off

Existing law: Employers with 25 or more employees are prohibited from discriminating against an employee who is a parent, guardian or grandparent having custody of a child in a licensed day care facility or in kindergarten through grade 12, for taking off up to 40 hours each year to participate in school activities, subject to specified conditions. Moreover, existing law requires an employer who provides sick leave to permit employees to use their sick leave to attend to the illness of a child, parent, spouse or domestic partner, and prohibits discrimination against employees for using or attempting to use sick leave for such purposes. Existing law also provides a definition of “sick leave” as leave provided for the purpose of illness, injury or medical condition.

Changes from this law: This law revises the reference to “child day care facility” to instead refer to “child care provider” and adds reasons for which the time-off can be taken under this law. Specifically, a parent can take up to 40 hours each year (not to exceed 8 hours in any calendar month) for the purpose of: 1) finding, enrolling, reenrolling a child in a school or with a licensed child care provider, or to participate in activities of the school or licensed child care provider with the child or 2) addressing a child care provider or school emergency. The employee must provide reasonable advance notice to the employer of the need for such time off. This bill expands the definition of “parent” from the original parent, guardian or grandparent, to also include a step-parent, foster parent, or person who stands in loco parentis to the child. This bill also defines “child care provider or school emergency” as a situation in which the child cannot remain in school or with the child care provider due to one of the following: 1) the school or child care provider has requested that the child be picked up, or has an attendance policy, excluding planned holidays, that prohibits the child from attending or requires the child to be picked up; 2) behavioral or discipline problems; 3) closure or unexpected unavailability of the school or child care provider, excluding planned holidays, or 4) a natural disaster, including but not limited to fire, earthquake or flood.

Labor Code Section 233 retains its previous provisions allowing an employee to use in any calendar year his/her accrued and available sick leave entitlement, in an amount not less than the sick leave that would be accrued during six months at the employee’s then current rate of entitlement to attend to an illness of a child, parent, spouse, or domestic partner of the employee. This law is amended to incorporate the reasons for the use of sick leave that are provided under the new California sick leave law Healthy Workplaces, Healthy Families Act of 2014 (effective July 1, 2014).

Action needed: Employers with 25 or more employees should revise their policies on time-off for school/child-care activities with the assistance of employment counsel.

AB 1513: Piece-Rate Compensation

Existing law: Employers are required to provide all non-exempt employees with rest and recovery periods at specified intervals and to count these breaks as hours worked. In 2013, the Court of Appeal in Gonzalez v. Downtown L.A. Motors ruled that piece-rate employees must be compensated separately for non-productive time, and later that year, the Court of Appeal’s decision in Bluford v. Safeway held that piece-rate compensation paid to employees does not cover pay for rest periods and that piece-rate employees are to be separately compensated for rest periods. In other words, under both the Gonzalez and Bluford cases, averaging piece rate compensation over all hours worked results in underpayment of wages.

Changes from this law: This new law builds on the Gonzalez and Bluford decisions and requires piece-rate employees to be separately compensated for rest and recovery periods and other nonproductive time at a specified minimum hourly rate. The law defines “other nonproductive time” as time under the employee’s control (exclusive of rest and recovery periods) that is not directly related to the activity being compensated on a piece-rate basis. A limited safe harbor provision exists by providing an affirmative defense for non-compliant employers who fulfill certain requirements by December 15, 2016, however new vehicle dealers are expressly excepted from this safe harbor. There are also added pay stub disclosure requirements for the compensation paid for rest and recovery periods as well as non-productive time. Specific key provisions are as follows:

Compensation requirements

Piece rate employees shall be compensated for rest and recovery periods and other nonproductive time separate from any piece-rate compensation.

Payment for rest/recovery periods:

Piece-rate employees are to be compensated for rest and recovery periods at a regular hourly rate that is no less than the greater of:

  1. An average hourly rate determined by dividing the total compensation for the workweek (exclusive of regular and overtime compensation rest and recovery period time), by the total hours worked during the workweek, exclusive of rest and recovery periods; or
  2. The applicable minimum wage

For employers who pay on a semi-monthly basis, employees shall be compensated at least the applicable minimum wage rate for the rest and recovery periods together with other wages for the payroll period during which the rest and recovery periods occurred. Any additional compensation required from the above provision (1) above) is payable no later than the payday for the next regular payroll period.

Payment for other nonproductive time:

Employees are to be compensated for other nonproductive time at an hourly rate that is no less than the applicable minimum wage. The amount of other nonproductive time may be determined either through actual records or the employer’s reasonable estimates, whether for a group of employees or for a particular employee, of other nonproductive time worked during the pay period. Note that employers who, in addition to paying any piece-rate compensation, pay an hourly rate of at least the applicable minimum wage for all hours worked, shall be deemed in compliance with this provision. Other nonproductive time is defined here as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.”

Paystub requirements

The itemized payroll statement already required under Labor Code 226(a) must now additionally state:

  1. The total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period; and
  2. The total hours of other nonproductive time (as determined through actual records of nonproductive time or the employer’s reasonable estimate), the rate of compensation, and the gross wages paid for that time during the pay period. Except that this requirement does not apply to employers paying for nonproductive time through an hourly rate of at least the applicable minimum wage and any required overtime.

Action to be taken: Starting on January 1, 2016, Employers with employees paid on a piece-rate basis (including service technicians) must start to separately compensate such employees for rest/recovery periods and account for payment of other nonproductive time. Pay plans should be revised accordingly. These employers must also re-program their payroll system to make the required disclosures on paystubs. Consult with employment counsel regarding such changes.

SB 501: Wage Garnishment Restrictions

Existing law: Under current law, an employer cannot withhold pursuant to an earnings withholding order more than the lesser of 25% of the judgment debtor’s weekly disposable earnings or the amount by which the individual’s disposable earnings for the week exceed 40 times the state minimum hourly wage in effect at the time the earnings are payable, unless an exception applies.

Changes from this law: Under this new law, effective July 1, 2016, the maximum amount of an individual judgment debtor’s weekly disposable earnings subject to levy under an earnings withholding order is the lesser of 25% of the individual’s weekly disposable earnings or 50% of the amount by which the individual’s disposable earnings for the week exceed 40 times the state minimum hourly wage (or applicable local minimum hourly wage, if higher) in effect at the time the earnings are payable. For pay periods other than weekly, the following multipliers shall be used to determine the maximum amount of disposable earnings subject to levy under an earnings withholding order that is proportional in effect:

  1. For a daily pay period, the amounts shall be identical as for a weekly pay period
  2. For a biweekly pay period, multiply the applicable hourly minimum wage by 80 work hours
  3. For a semimonthly pay period, multiply the applicable hourly minimum wage by 862/3 work hours
  4. For a monthly pay period, multiply the applicable hourly minimum wage by 1731/3 work hours.

Action needed: Payroll personnel should revise their withholding practices accordingly.

AB 1509: Employer Liability

Existing law: Existing law prohibits an employer from taking adverse action against any employee or applicant because the individual has engaged in protected conduct, including making a bona fide complaint. Specifically, California Labor Code Sections 98.6, 1102.5, and 6310 prohibit an employer from discharging, discriminating or retaliating against, or otherwise taking any adverse action against any employee or applicant for employment because the employee or applicant has engaged in protected conduct. Such protected conduct generally relates to bringing complaints about pay and working conditions, or whistleblower activities. Labor Code Section 2810.3 (enacted last year) also requires an employer to share with a labor contractor all civil legal liability for workers supplied by that labor contractor regarding payment of wages, failure to obtain workers’ compensation coverage and workplace safety provisions.

Changes from this law: This law extends the non-retaliation protections of the above-referenced Labor Code Sections to an employee who is a family member of a person who engaged in, or was perceived to have engaged in, the protected conduct or made a protected complaint. The bill also amends Labor Code Section 2810.3 to exclude from that law client employers that use certain third-party household goods carriers, as specified.

Action needed: Employers should revise their non-retaliation policy with assistance of employment counsel to reflect these changes.

AB 1506: Private Attorneys General Act right to cure

Existing law: Under the Private Attorneys General Act of 2004, an aggrieved employee has the option to bring a civil action on behalf of the employee and other current or former employees for violations of the Labor Code. Under Labor Code 226, employers are required to provide specified information to employees on a wage statement with the employee’s pay.

Changes from this law: This law was passed as emergency legislation, and therefore took effect immediately when it was signed on October 2, 2015. This law provides the employer with the right to cure a violation of the wage statement law requiring the wage statements to state: (1) the pay period dates, and (2) the name and address of the legal entity of the employer, as a prerequisite before the employee may bring a civil action under the Act.

Under the law, the employer has 33 days from the date of the postmark on the notice of violation to cure the alleged violation (by reissuing 3 years of wage statements to all employees who received the defective ones) and to provide written notice by certified mail to the aggrieved employee or representative and the Labor and Workforce Development Agency that the alleged violation is cured, including a description of actions taken.

In such a situation, no PAGA claim (Labor Code § 2699) may commence for this alleged violation. No employer may avail itself of these notice and cure provisions more than once in a 12-month period for the same violation or violations contained in the notice, regardless of the location of the worksite.

AB 1245: Electronic reporting and funds transfers

Existing law: Employers are required to file a report of contributions, a quarterly return, a report of wages paid, and an annual reconciliation return, as specified, to the EDD and to make contributions for unemployment insurance premiums. Employers are also required to withhold income taxes each calendar quarter, file a withholding report, a quarterly return, a report of wages, and pay over the taxes required to be withheld. Electronic funds transfers currently satisfy the filing requirements. A 15% penalty applies to employers who fail to timely pay contributions and a $20 penalty can be imposed for each unreported wage item.

Changes from this law: This law makes it mandatory for employers to electronically file the following with the EDD: reports of contributions, quarterly returns, reports of wages paid, and annual reconciliation returns. This law also requires all contributions for unemployment insurance premiums to be remitted electronically, with certain exceptions.

Compliance is required for businesses with 10 or more employees by January 1, 2017 and for all employers by January 1, 2018. The new law extends the above-referenced penalties to employers who do not comply with the electronic reporting/remittance requirements. Certain exemptions to some of these requirements may be granted based on lack of automation, severe economic hardship, a current exemption from filing electronically for federal purposes, or other good cause.

Action needed: Employers should plan in advance to ensure compliance by the 2017 and/or 2018 deadlines.

AB 987: Retaliation for Accommodation Request

Existing law: As part of the Fair Employment and Housing Act’s non-discrimination provisions, employers also have the obligation to reasonably accommodate an employee’s disability and religious beliefs. State law already prohibits retaliation against an employee for making a request for an accommodation based on a pregnancy-related condition.

Changes from this law: This law specifically prohibits an employer from retaliating or otherwise discriminating against a person for requesting accommodation of his or her disability or religious beliefs, regardless of whether the accommodation request was granted.

Action required: Employers should review their policies regarding reasonable accommodations for disability and religious beliefs and update accordingly with the assistance of employment counsel.

AB 970: Labor Commissioner; Enforcement of Employee Claims

Existing law: The Labor Commissioner has the authority to investigate and enforce statutes and IWC orders regarding the payment of wages. Also, existing law gives employees a private right of action to recover expenditures incurred by the employees as a consequence of the performance of their duties or as a result of obeying the employer’s directives.

Changes from this law: This new law authorizes the Labor Commissioner to also investigate and, upon request from a local entity, enforce local laws regarding overtime hours and minimum wage provisions, and to issue citations and penalties for violations, except when the local entity has already issued a citation for the same violation. Conversely, if the Labor Commissioner has already issued a citation for a violation, the local entity will be prohibited from issuing a citation for the same violation. This bill also authorizes the Labor Commissioner to enforce provisions requiring an employer to indemnify employees for expenditures or losses incurred by the employees in direct consequence of the performance of their duties or as a result of obeying the employer’s directions.

SB 623: Workers’ Compensation Benefits

Existing law: An Uninsured Employers Fund and Subsequent Injuries Benefits Trust Fund exist to compensate employees injured in the course of employment in the event that the employer fails to provide workers’ compensation benefits as required under law.

Changes from this law: This law provides that a person shall not be prohibited from receiving compensation under either of these funds solely because of his/her citizenship or immigration status.

AB 622: E-Verify System Use as Unlawful Business Practice

Existing law: The federal E-Verify system allows employers, on a voluntary basis, to verify that a new hire is authorized to work in the U.S. Existing law prohibits the state, or a city, county or special district from requiring a private employer to use an electronic employment verification system such as E-Verify, except when required by federal law, or as a condition of receiving federal funds.

Changes from this law: This law prohibits an employer or any other individual from using the E-Verify system in a time or manner not required or authorized under federal law or by a federal agency to check the employment authorization status of an existing employee or an applicant who has not been offered employment. Employers are not prohibited under this law from utilizing the federal E-Verify system, in accordance with federal law, to check the employment authorization status of a person who has been offered employment.

This law also specifies that upon using the federal E-Verify system to check the employment authorization status of a person, if the employer receives a tentative non-confirmation issued by the Social Security Administration or the United States Department of Homeland Security, which indicates the information entered in E-Verify did not match federal records, the employer shall comply with the required employee notification procedures governing the use of the federal E-Verify system. The employer shall furnish to the employee as soon as practicable any notification issued by the Social Security Administration or the United States Department of Homeland Security containing information specific to the employee’s E-Verify case or any tentative non-confirmation notice. In addition to other remedies available, an employer who violates this section is liable for a civil penalty not to exceed ten thousand dollars ($10,000) for each violation of this section. Each unlawful use of the E-Verify system on an employee or applicant constitutes a separate violation.

Action needed: Employers who use the E-Verify system should make sure that their practices are consistent with these requirements.

SB 667: Disability Insurance Eligibility; Waiting Period

Existing law: Under current law, a disabled individual is eligible to receive disability benefits once the individual has been unemployed and disabled for a waiting period of 7 consecutive days during each disability benefit period, and that during this 7-day waiting period, no disability benefits are payable. Also, existing law provides that if an individual receives 2 consecutive periods of disability benefits due to the same or a related cause or condition and separated by not more than 14 days, they are considered as one disability benefit period.

Changes from this law: Beginning July 1, 2016, the 7-day waiting period would be waived for an individual who has already served the 7-day waiting period for the initial claim when that person files a subsequent claim for disability benefits for the same or a related condition within 60 days after the initial disability benefit period. Also beginning July 1, 2016, this bill would extend to 60 days the time between claims for the same or related cause or condition to be considered one disability benefit period.

SB 588: Nonpayment of Wages; Judgment Enforcement

Existing law: A judgment creditor may levy upon the property of a judgment debtor to satisfy a judgment. Additionally, the Labor Commissioner has the authority to investigate and hear employee claims in any action to recover wages, penalties and other demands for compensation.

Changes from this law: This law gives the Labor Commissioner increased power in enforcing judgments related to wage laws in California. Now, as it pertains to judgments arising from an employer’s nonpayment of wages for work performed in California, the Labor Commissioner will have the authority to, among other things, use any of the existing remedies available to a judgment creditor and to act as a levying officer when enforcing a judgment pursuant to a writ of execution, including issuing a notice of levy for bank funds or accounts receivable. The Labor Commissioner is now authorized to provide for a hearing to recover civil penalties against an employer or person acting on behalf of an employer for a violation of laws regarding Industrial Welfare Commission orders. Moreover, if a final judgment is issued against an employer arising from nonpayment of wages for work performed in California, the employer is prohibited from continuing to conduct business in the state unless it obtains a bond to cover the judgment. If an employer violates the bond requirement, the Labor Commissioner is authorized to create a lien on the employer’s or successor employer’s real or personal property in California. Also, if an employer violates this bond requirement, the Labor Commissioner is authorized to issue a “stop order” prohibiting the use of employee labor by the employer until the employer complies with the bond requirement. Failure of the employer to observe a stop order would subject the employer, owner, director, officer or managing agent of the employer to a misdemeanor conviction.

AB 1422: Transportation Network Companies

Existing law: “Transportation network company” is defined to mean an organization operating in California that provides prearranged transportation service for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle. Currently these entities are required to obtain liability insurance coverage for the entities and their drivers.

Changes from this law: Transportation network companies will also be required to participate in the pull-notice system under Section 1808.1 of the Vehicle Code to regularly check the driving records of a participating driver regardless of whether the driver is an employee or an independent contractor of the transportation network company. Under the pull-notice requirement, a prospective employer must obtain a report of the applicant’s driving record and license status, and the employer of a current driver must, obtain updated reports at least every 12 months. The employer must verify that each employee's driver's license has not been suspended or revoked, the employee's traffic violation point count, and whether any serious violations have been incurred.

AB 583: Military Service; Employment Protections

Existing law: Members of the National Guard ordered into active state service by the Governor or active federal service by the President of the United States for emergency purposes, and reservists called to active duty are protected with respect to their private employment rights upon return from service.

Changes from this law: This new law extends such protections to members of the National Guard of other states who are called to military service by their respective Governors or by the President of the United States, and who have left a position in private employment in California.

Non-employment related laws

AB 1178: Vehicle Manufacturers and Distributors

Existing law: The New Motor Vehicle Board was established in affiliation with the Department of Motor Vehicles, and existing law requires the Board to hear and decide certain protests presented by a motor vehicle franchisee in regard to a dispute with the vehicle manufacturer.

Changes from this law: This bill authorizes the board to hear protests by an association (such as the California New Car Dealers Association) to challenge the legality of an export or sale-for-resale prohibition policy of a manufacturer, manufacturer branch, distributor, or distributor branch, and would establish procedures for hearing those protests, as specified. This law recasts the provisions relating to export and sale-for-resale prohibitions to provide that it would be unlawful to take or threaten to take any adverse action against a dealer pursuant to an export or sale-for-resale prohibition because the dealer sold or leased a vehicle to a customer who either exported the vehicle to a foreign country or resold the vehicle in violation of the prohibition unless the export or sale-for-resale prohibition policy was provided to the dealer in writing at least 48 hours before the sale or lease of the vehicle and the dealer knew or reasonably should have known of the customer’s intent to export or resell the vehicle in violation of the prohibition.

In addition, the law establishes a rebuttable presumption that the dealer did not have reason to know of the customer’s intent to export or resell the vehicle if the dealer causes the vehicle to be registered in this or any other state, and collects or causes to be collected any applicable sales or use tax due to this state.

AB 265: Consumer Protection; Buy Here Pay Here Dealers

Existing Law: Buy-here-pay-here dealers are prohibited from disabling a vehicle with starter interrupt technology unless the dealer notifies the purchaser in writing at the time of the vehicle purchase that the vehicle is equipped with starter interrupt technology and that a warning will be provided no less than 48 hours before the use of the starter interrupt technology to shut down the vehicle remotely. Also under existing law, in the event of an emergency the buyer will be provided the ability to start a dealer-disabled vehicle for no less than 24 hours after the vehicle’s initial disablement. A violation of this law is misdemeanor punishable as a fine not exceeding $1,000.

Changes from this law: This law extends the notice time and scope of disclosures in the written notification to the purchaser at the time of sale. Specifically, the written disclosure now must state that a warning will be provided 5 days before the use of the starter interrupt technology for all weekly payment term contracts and 10 days before the use of starter interrupt technology on all other contracts, and a final warning will be provided no less than 48 hours before the use of the starter interrupt technology to shut down the vehicle remotely. Also, this written notice must now state that in the event of an emergency, the purchaser will be provided with the ability to start a dealer-disabled vehicle for no less than 24 hours after the vehicle’s initial disablement. The law also increases the maximum fine amount to $2,000.

AB 1521: Disability Access; Construction-Related Accessibility Claims

Existing law: Currently, a demand letter or complaint sent to a business alleging violation of construction-related disability access laws must include a written advisory, and a claimant’s attorney must provide notification to the State Bar of California and California Commission on Disability Access of such demand or claim. Also, a defendant may request the court to schedule a mandatory early evaluation conference within 70 days.

Changes from this law: Regarding the written advisory that must accompany a demand letter or complaint, this bill requires addition of certain information regarding the rights and obligations of business owners and commercial tenants, as specified, and inclusion of a verified answer form that will be developed by the Judicial Counsel by July 1, 2016. This law extends a claimant’s attorney’s obligations to notify the State Bar of California and California Commission on Disability Access of a demand letter or complaint, and the outcome of such. If requested by the defendant, in addition to a early evaluation conference, the court would order the parties and their counsel to meet at the premises, or a specified place, no later than 30 days after issuance of the court order, to jointly inspect the premises, and review the issues, that are claimed to constitute a violation of a construction-related accessibility standard. Additionally, for cases filed by or on behalf of a high-frequency litigant, this law requires the complaint to also state whether it is filed by, or on behalf of, a high-frequency litigant, the number of complaints alleging a construction-related accessibility claim that the high-frequency litigant has filed during the 12 months prior to filing the complaint, and the reason why the individual visited the place of public accommodation. Moreover, a high-frequency litigant must pay an additional $1000 filing fee if the complaint alleges a construction-related access claim.

AB 604: Electrically Motorized Boards

Existing law: Existing law regulates the operation of bicycles, motorized scooters, and electric personal assistive mobility devices, as defined. Existing law makes a violation of these provisions punishable as an infraction.

Changes from this law: This bill defines “electrically motorized board” and requires an operator of such a device to be at least 16 years of age. The bill would also require electrically motorized boards to be equipped with safety equipment, as specified, and restrict the operation speed of electrically motorized boards. It also prohibits the operation of an electrically motorized board on a highway while under the influence of alcohol or any drug, or the combined influence of alcohol and any drug. It requires the operator of an electrically motorized board to wear a helmet while on a highway, bikeway, or any other public bicycle path, sidewalk, or trail. Certain local authorities and the Department of Transportation are allowed to adopt rules and regulations for the use of electrically motorized boards, including rules restricting or prohibiting persons from riding electrically motorized boards on freeways, highways, sidewalks, or roadways. This bill provides that an electrically motorized board is not a motorized skateboard for those purposes.

AB 1230: ADA Compliance Loan Program for Small Businesses

Existing law: The Americans with Disabilities Act obligates businesses to provide a specified level of access to their services for individuals with disabilities.

Changes from this law: This law provides for the creation and funding of the California Americans with Disabilities Small Business Capital Access Loan Program to assist small businesses in complying with the Americans with Disabilities Act. Eligible projects under this law are those involving physical alterations or retrofits to an existing small business facility of less than 10,000 square feet necessary to ensure that facility is in compliance with the Americans with Disabilities Act, and has the financing necessary to pay eligible costs of the project.

Qualified small businesses under this law include those legal entities that have their primary location within the State and meet the following criteria: (A) fifteen or fewer full-time equivalent employees, (B) less than one million dollars ($1,000,000) in total gross annual income from all sources, and (C) do not provide overnight accommodations.

AB 281: Collateral Recovery

Existing law: The Collateral Recovery Act allows licensed re-possessors to perform repair work upon vehicles and charge owners if expressly authorized to do so, and governs the procedure by which personal items are removed from collateral, maintained and turned-over to authorized individuals. Under existing law, whenever a peace officer determines, among other things, that a person was driving without a license or while his or her driving privilege was suspended or revoked, the peace officer is authorized to remove and seize that vehicle. Existing law requires the legal owner to indemnify and hold harmless a storage facility from any claims arising out of the release of the vehicle to the legal owner or the legal owner’s agent and from any damage to the vehicle after its release, including the reasonable costs associated with defending any such claims.

Changes from this law: This bill, in part, prohibits licensed re-possessors from performing, or charging for, repair work, cleaning, or detailing. This bill would require a licensed repossession agency, at least annually, to provide a legal owner with a notice of certain rules to which the agency and owner are bound. This bill also requires a licensee to request authorization from the debtor if personal effects or other personal property not covered by a security agreement are to be released to someone other than the debtor, and requires the inventory to be provided to a debtor no later than 96 hours after the recovery of the collateral if a licensee is unable to open a locked compartment that is part of the collateral, with specified exceptions. The bill also prohibits a licensee from selling personal effects and remitting money from the sale to a third party.

This bill would require the legal owner of collateral, by operation of law and without requiring further action, to indemnify and hold harmless the state, a law enforcement agency, city, county, city and county, a tow yard, storage facility, or an impounding yard from a claim arising out of the release of the collateral to a licensed re-possessor or licensed repossession agency, and from any damage to the collateral after its release, including reasonable attorney’s fees and costs associated with defending a claim, if the collateral was released in compliance, as specified.

AB 506: Limited Liability Companies

Existing law: The California Revised Uniform Limited Liability Company Act authorizes a member of an LLC to dissociate as a member by express will, and deems a person to be dissociated from an LLC upon the occurrence of certain events, including, among others, an individual’s death. Existing law requires that any distributions made by a limited liability company before its dissolution and winding up be among the members in accordance with the operating agreement.

Changes from this law: This law provides that, among other things, if an LLC member dies, or a guardian or conservator of the estate is appointed for the member, or a member’s interest is being administered by an attorney-in-fact under a valid power of attorney, the member’s executor, administrator, guardian, conservator, attorney-in-fact, or other legal representative may exercise all of the member’s rights for the purpose of settling the member’s estate or administering the member’s property, including any power the member had under the articles of organization or an operating agreement to give a transferee the right to become a member. The bill also changes what an operating agreement may provide, and provides that Labor Code Sections 406 and 407 (relating to property put up by an employee or an employee’s investment in the business in connection with holding employment), shall not apply to membership interests issued by any limited liability company or foreign limited liability company. Under this law, the profits and losses of a limited liability company would be allocated among the members, and among classes of members, in the manner provided in the operating agreement, and profits and losses would be allocated in proportion to the value of the contributions from each member if the operating agreement does not otherwise provide.

Action needed: Limited Liability Company members should review the LLC’s operating agreement in light of these changes, with the assistance of business counsel.

AB 605: Dealer Charges; License Plates

Existing law: Private service providers are eligible to interface with the Department of Motor Vehicles to electronically process vehicle titling and registration transactions. Vehicle dealers may charge the purchaser or lessee of a vehicle for certain fees and services, including an electronic filing charge, not to exceed the actual amount the dealer is charged by a first-line service provider, for providing license plate processing, postage, and other specified fees and services relating to first-line service providers.

Changes from this law: This law prohibits electronic filing charges from being used to pay for additional fees, goods, or services not directly related to the electronic registration of a motor vehicle including, but not limited to, the receipt by the dealer of free or discounted goods, services, or financial incentives. However, this law does not prohibit a first-line service provider from entering into contracts with dealers for products and services unrelated to electronic vehicle registration services.

Action needed: Dealers should ensure that any electronic filing charges charged to customers relate only to costs for those specific services.

AB 1465: Drivers Licenses

Existing law: An applicant for an original driver’s license or identification card is currently required to submit satisfactory proof that the applicant’s presence in the United States is authorized under federal law.

Changes from this law: Now, an applicant for an original driver’s license or identification card must submit satisfactory proof of California residency and that the applicant’s presence in the United States is authorized under federal law. The Department of Motor Vehicle shall adopt regulations to carry out the purposes of this law, including, but not limited to, procedures for: (1) verifying that the applicant is a California resident and that his or her presence in the United States is authorized under federal law, (2) issuance of a temporary license pending verification of the applicant’s status, and (3) hearings to appeal a denial of a license, temporary license, or identification card. This law also specifies that a peace officer shall not detain or arrest a person solely on the belief that the person is an unlicensed driver, unless the officer has reasonable cause to believe the person driving is under 16 years of age.

SB 64: California Transportation Plan:

Existing law: The California Transportation Commission is required to adopt and submit to the Legislature, by December 15 of each year, an annual report summarizing the commission’s prior-year decisions and transportation issues facing the state, as well as any significant upcoming transportation issues anticipated to be of concern to the public and the Legislature. Existing law also requires the Department of Transportation to prepare the California Transportation Plan and to update the plan by December 31, 2015, and every 5 years thereafter.

Changes from this law: This new law requires that the annual report contain specific, action-oriented, and pragmatic recommendations for legislation to improve the transportation system. It also provides that the California Transportation Commission shall review recommendations in the update to the California Transportation Plan prepared by the department in 2015, and every five years thereafter, and prepare specific, action-oriented, and pragmatic recommendations for transportation system improvements. A report containing the specific recommendations shall be submitted to the Legislature and the Governor by December 31, 2016, and every five years thereafter.

SB 197: Finance Lenders, Commercial Loan

Existing law: The California Finance Lenders Law provides for the licensure and regulation of finance lenders by the Commissioner of Business Oversight. Existing law defines a finance lender as any person engaged in the business of making consumer loans or commercial loans. A commercial loan is defined as a loan of a principal amount of $5,000 or more, or any loan under an open-end credit program, whether secured by either real or personal property, or both, or unsecured, the proceeds of which are intended by the borrower for use primarily for purposes other than personal, family, or household.

Changes from this law: This law allows a finance lender to pay an unlicensed person for referrals for commercial loans under a number of enumerated conditions. This law also provides specific loan transaction-related activities that an unlicensed person may not engage in. The commissioner may adopt regulations under this section to impose conditions on the referral activity authorized under this section. The commissioner may classify persons, loans, loan terms, referral methods, and other matters within his or her jurisdiction, and may prescribe different requirements for different classes of loans. Also, under this law, a licensee that is a finance lender shall provide a prospective borrower who has been referred by an unlicensed person a written disclosure statement, in 10-point font or larger, at the time the licensee receives an application for a commercial loan, and shall require the prospective borrower to acknowledge receipt of the statement in writing. The specific language of the required statement is provided in the law.

SB 178: Privacy of Electronic Communications; Search Warrants

Existing law: Search warrants are issued based on probable cause, supported by affidavit, naming or describing the person to be searched or searched for, and particularly describing the property, thing, or things and the place to be searched. Existing law also provides the grounds upon which search warrants may be issued.

Changes from this law: This new law requires a government entity to obtain a search warrant, wiretap order or other applicable order before it can compel production of or access to electronic communication information or electronic device information, except in certain emergency situations. Moreover, a government entity may access electronic device information by means of physical interaction or electronic communication with the device only pursuant to a warrant, wiretap order, with consent of the authorized possessor or owner of the device, or other specified situations.

The law also sets forth the specific information that the warrant must contain and the processes that the court may employ in issuing any warrant or order for electronic information. Moreover, a service provider may voluntarily disclose electronic communication information or subscriber information when state or federal law does not otherwise prohibit that disclosure. If a government entity receives electronic communication information voluntarily provided, it must comply with certain specified procedures pertaining to the destruction of such information. This law also identifies processes to be followed by the government entity that obtains such information pursuant to an emergency, and specific notice requirements to the identified targets of the access pursuant to a warrant or emergency situation.

The above descriptions are merely summaries of new laws and are not intended to be comprehensive guides of all your obligations. You should consult with knowledgeable automotive industry legal counsel for further details about compliance.