(​May 9, 2012) A California Chamber of Commerce-sponsored job creator bill that would have protected employers from inappropriate litigation by affirming they can rely upon the state government to provide them with information regarding how to comply with the law failed to pass the Senate Judiciary Committee yesterday on a vote of 2-3.

SB 1374 (Harman; R-Huntington Beach) is supported by the CalChamber and a broad-based coalition including business/employer groups and local chambers of commerce.

Policy Advocate Jennifer Barrera and Senator Tom Harman (at podium).

Principal co-authors of SB 1374 are Senator Lou Correa (D-Santa Ana), author of a similar 2011 bill, and Assemblymember Donald Wagner (R-Irvine). 

SB 1374 “will encourage compliance, will provide business with an incentive to go to state agencies and seek advice on how to comply,” said CalChamber Policy Advocate Jennifer Barrera. She noted that the coalition supporting the bill includes more than 50 employer organizations employing tens of thousands of employees. “There is a need for this bill to achieve certainty for business.” she said.

Ironically, an individual or business that seeks guidance from one of these agencies and relies upon the information provided is given no protection or benefit if litigation is filed to challenge the agencies’ advice. For example:

Under Proposition 13, an insurance company must seek prior written approval from the California Department of Insurance regarding any rate charged to consumers. This approved rate is the only one an insurance company subject to this process is allowed to charge. Yet, if a consumer challenges the rate for being unfair or discriminatory, the insurance company is provided no benefit for being specifically directed by a state agency to charge the rate at issue. 

The Division of Labor Standards Enforcement (DLSE) issues opinion letters on wage, hour and working condition topics, as well as an enforcement manual setting forth the DLSE’s interpretation and position on these issues. Employers are encouraged to refer to the DLSE’s written materials for “guidance” when there is no published, on-point case available. However, employers are provided with no certainty that they will be shielded from liability if they comply in good faith with the DLSE’s written opinions or interpretations.

SB 1374 provided such Californians with legal protection if their actions are challenged in litigation and they can prove their actions were based upon guidance received from a state agency.

This policy provides credibility to California’s state agencies charged with the responsibility to enforce such laws and will help to eradicate the negative public perception of state government.

In California, a taxpayer may be relieved of all taxes, interest and penalties if it can demonstrate that a failure to remit taxes was based upon the taxpayer’s reasonable reliance upon the written advice of the chief counsel of the Franchise Tax Board. 

The federal government allows the same defense for employers that rely in good faith upon the advice, opinion letters and guidance of the U.S. Department of Labor, Wage and Hour Division, regarding the Fair Labor Standards Act. Congress included this defense in the Portal-to-Portal Act, which states that “uncertainty on the part of industry,” as well as “the difficulties in the sound and orderly conduct of business and industry,” could have a negative impact on commerce.

Providing certainty through SB 1374 will help relieve this burden on employers and every other Californian, thereby producing a better business environment, growth in the economy, and improve public perception of state government.

Key Vote

The May 8 Senate Judiciary vote on SB 1374 was:

Ayes: Blakeslee (R-San Luis Obispo), Harman (R-Huntington Beach).

Noes: Corbett (D-San Leandro), Evans (D-Santa Rosa), Leno (D-San Francisco).