On Sept. 10, 2014, Governor Jerry Brown signed AB 1522 — the Healthy Workplaces, Healthy Families Act of 2014 (“HWHFA”). Effective July 1, 2015, California law will mandate paid sick leave accrual for employees statewide at a rate of one hour for every 30 hours worked, allowing employers to cap employee use of paid sick leave to 24 hours (or three days) per year, with accompanying notice and recordkeeping requirements.
Unlike other paid sick leave ordinances, California’s law has no exclusions for small employers or nonprofits, so CPA firms in California that employ workers will be subject to the HWHFA. Firms who already have paid sick leave or personal time off (PTO) policies in place should determine whether their current policies meet the requirements of the law. Firms that do not currently offer paid sick leave should determine how they plan to implement the new requirements, including whether they plan to incorporate an accrual or lump sum method for providing the required leave. All firms should also ensure that they have the appropriate notice and recordkeeping procedures in place, and should review their policies and procedures with their legal counsel experienced in employment practice wage and hour law matters as appropriate.
Since the impact of this new law may also be significant to a firm’s business clients, CAMICO recommends firms should consider making these clients aware of the new law as soon as possible. Certainly, if a firm provides payroll services or prepares the payroll tax returns for clients subject to this new law, some of them may “assume” that the firm will be responsible for, as well as assist them with, complying with the HWHFA. CAMICO strongly encourages firms to communicate with these clients and clarify the extent of your responsibilities and the steps they should take to determine the appropriateness of their compliance. This awareness campaign will help minimize your risk of a future allegation from your client citing that “my trusted advisor failed to warn me.” To help policyholders’ client awareness efforts, CAMICO developed a sample Client Notification Letter for California Employers — AB 1522 “Healthy Workplaces, Healthy Families Act of 2014.” Policyholders will find the link to the letter in the email alert sent June 16, and can also reference the sample letter on the Knowledge Tree on the Members-Only Site. Please navigate to the “Alert Documents” folder, then “2015,” then “Calif. Paid Sick Leave Law.”
Engagement letters are also an important risk management tool to protect your firm by clarifying to clients (as well as to juries) the scope and limits of your work. Although they will not make a firm immune to lawsuits, engagement letters can be your first line of defense if a client makes a claim against you. It is therefore important to make sure that you use engagement letters for all of your clients. If your firm performs payroll services for some of your clients, or prepares the payroll tax returns, or any other services that may pose additional risks with respect to this new law, you may want to also consider adding language in your engagement letters that specifically identifies what you will NOT be doing for your clients with respect to compliance with HWHFA. CAMICO’s sample engagement letters for California clients subject to this new law are available to download from the Members-Only Site under Knowledge Tree, Alert Documents, 2015, Calif. Paid Sick Leave Law. Below is some suggested engagement letter language for your reference.
Management is responsible for the design, implementation and administration of applicable policies and procedures that may be required under the California “Healthy Workplaces, Healthy Families Act of 2014” (“HWHFA”). As
CAMICO’s claims experience continues to show that CPAs who successfully manage client expectations and follow professional standards are more likely to “get it right” and avoid becoming victims of potential liability exposures. Please note that the risk management tools identified above are not meant to be all-inclusive. Your firm might choose to incorporate information on this issue in your client newsletters or by other methods. Adequately communicating (and documenting!) this issue to your clients that might be impacted is most important.
Where should I go for assistance and additional information if I have questions regarding my obligations?
Additional information and resources are available on California’s website under the Division of Labor Standards Enforcement at http://www.dir.ca.gov/dlse/ab1522.html. It is CAMICO’s understanding that after these types of laws go into effect, the state often issues clarifications and additional information. We suggest that you check the website listed above regularly for further information.
CAMICO policyholders can contact CAMICO at 1.800.652.1772 or email the Loss Prevention Department at lp@camico.com. Please note that this alert is for informational purposes only, and that CAMICO does not provide specific advice or coverage on wage and hour issues.