Governor Jerry Brown signed a number of bills affecting employers and employment law into law at the close of the 2013 California legislative session. Many of these laws, scheduled to take effect in 2014, will have an impact on the day-to-day operations and policies of California business in coming year. An overview of some of the new laws is provided below.
SB 323 -New Regulations for California LLCs
The California Revised Uniform Limited Liability Act (SB 323), effective January 1, 2014, completely replaces the Beverly-Killea Limited Liability Company Act, a law which has governed LLCs in California since 1994. Some of the key changes in the new law include:
• Operating Agreements: A written operating agreement among the members is no longer required. The new law requires only a record, or implication of an agreement. It is therefore important to create a clear, well-drafted operating agreement that limits the agreement between the parties solely to the written document to ensure that courts do not consider other items, such as emails among members or even phone calls, to be part of an agreement between the parties.
• New Members: New members of the LLC will be bound by the terms of the operating agreement even if the new member does not sign or otherwise consent to the agreement.
• Fiduciary Duties: The duty of loyalty owed by a manager or managing member to the LLC is no longer the same as the open-ended duties a partner owes to the partnership and other partners. Instead, the new law limits the duties to those expressly listed in the statute. In addition, as long as they are reasonable, members may now specifically set forth certain activities that will not violate fiduciary duties through the operating agreement.
Notably, while the Beverly Killea Act will continue to govern LLC operating agreements entered into before January 1, 2014, the new law will regulate all new LLCs formed on or after January 1st.
AB 44 – Requiring Submission of Subcontractors’ License Numbers in Public Construction Bids
Beginning July 1, 2014, AB 44, which amends Public Contract Code section 4104, will require a prime contractor to list a subcontractor’s contractor license number when bidding on public construction projects. The bill also requires public agencies to modify their public construction bid forms to require the license number in the subcontractor listing form. The law is intended to better enable public entities to verify that the listed subcontractors are in good standing with the Contractors State License Board and hold active licenses.
AB 556 -Military Status Protections
To increase employment discrimination protections for military members and veterans, effective January 1, 2014, “military and veteran status” will be added to the existing list of categories protected from employment discrimination under the Fair Employment and Housing Act. This new protected characteristic includes members or veterans of the U.S. Armed Forces, U.S. Armed Forces Reserve, the U.S. National Guard, and the California National Guard. This law applies to both private and public employers. AB 556 will not affect the current California law allowing employers to consider military or veteran status for purposes of awarding a veteran’s preference.
AB 263 and SB 666–Increased Penalties for Employer Retaliation
Effective January 1, 2014, AB 263 and SB 666 strengthen the California Labor Code’s protections for workers by expanding the grounds for a finding of retaliation, increasing penalties for retaliation, and broadening protections for whistleblowers. Under the new laws, employers may now face a penalty of up to $10,000 per employee for each instance of retaliation. In addition, AB 263 and SB 666 include new protections for works against employers who retaliate by threatening to report immigration status. Under SB 666, an employer’s business license may be suspended or revoked if the DLSE or a court finds that an employer retaliated against a complaining coworker by making a report or threatening to report the citizenship or immigration status of a worker or worker’s family member.
It is important to amend your company’s policies and handbooks and to train supervisors where necessary before these laws take effect. If you have any questions about new laws taking effect in 2014 that may impact your California business, contact the Bay Area business and employment attorneys at the Law Offices of James G. Schwartz today.
California’s Minimum Wage Increase, Effective July 1, 2014, May Potentially Impact Your Business’s Exempt and Non-Exempt Employees, October 15, 2013, Pleasanton Business and Commercial Law Blog