When I started my first business, I got a crash course in California’s workers compensation laws. My sole employee was part-time and happened to be my college-age brother. Nonetheless, I had to pay a percentage of my payroll to the state to cover any work-related injury or illness he might incur.
Three years later, my payroll had grown to 20 employees, and the amount I paid for workers’ compensation insurance had grown to match. I was not in a position to self-insure, so for every dollar in payroll, a percentage was paid to my insurance company for a workers’ compensation insurance policy.
As a small business owner, I knew my employees personally; I worked side by side with them. They were my friends, so it seemed only right to take responsibility for any injury or illness that they suffered on the job. In the same vein, I covered half of the health insurance premiums for my employees and their families. Yes, it cut into profits, but as long as I was making enough to keep us all afloat, it was simply the decent thing to do.
Starting a business in the 1970s was difficult, but it seems practically impossible now. The unemployment rate is the highest since the Great Depression, there is far less money being spent on non-essentials, and state-imposed regulations and restrictions are burdensome. What’s more, small business owners and would-be entrepreneurs have to contend with a surprisingly radical change in the workers compensation system.
Responding to the COVID-19 emergency, Gov. Gavin Newsom announced Executive Order N-62-20, allowing any employee who contracted COVID-19 to be covered by workers’ compensation regardless of whether or not the exposure was actually work-related. This is called a “rebuttable presumption,” or more bluntly, holding businesses guilty until proven innocent.
But why should a business be responsible if the illness isn’t work related? That is not how the system has evolved for over a century in California. Why change it?
This change could prove to be a major mistake for California. By eliminating the burden of proof, this executive order opens the floodgates for false claims, which in turn will affect employees genuinely in need of coverage. The additional premium cost alone is estimated to be $1.2 billion. Coming at a time when our communities desperately need the government’s support, funneling money into reforming a system that was already working just fine is hardly the best use of funds.
And now we hear that the state legislature is considering memorializing this order, or even worse expanding it. Now is not the time for the legislature to push through more costly requirements for small businesses in our state. With the economy on the precipice, we need to relieve businesses of onerous expenses.
In the past few months, small businesses have had to adjust to employees being laid off, working from home, illness, lost sales and a host of security and structural issues. Adding a new financial burden could bring many to the brink of closure. According to the National Federation of Independent Businesses, six in 10 businesses may close due to the impacts of the coronavirus.
Annual California workers compensation cost businesses$23.5 billion before the governor’s executive order. It’s a vital service, no doubt about it. But implementing an expensive change that has the potential to hurt the very businesses it’s trying to help does not inspire confidence nor does it make sense. If anything, for small business owners, it’s just one more hurdle to recovery.
Raoul Lowery Contreras is a Marine Corps veteran, political consultant and author of the new book White Anglo-Saxon Protestants (WASPS) & Mexicans. His work has appeared in the New American News Service of the New York Times Syndicate.