It should be obvious that the state of California cannot long endure without businesses reopening and employing people, but Gov. Gavin Newsom seems locked into the mistaken belief that businesses are somehow wealthy enough to absorb endless financial hits and still keep signing the same number of paychecks.
For example, the governor issued an executive order that will sharply increase the cost of workers’ compensation insurance for California businesses. It creates a rebuttable presumption that any essential workers who contract COVID-19 became infected on the job. This is a reversal of the usual burden of proof for workers’ comp claims, which is on the employee to prove that the injury or illness was work-related.
The California Federation of Labor had requested the change in a March 27 letter to Newsom, characterizing it as a way for employees to avoid delays in accessing workers’ comp benefits.
But business groups cited the extraordinary cost increase that employers would face from the adjustment in insurance rates to account for the change. The Workers’ Compensation Insurance Rating Bureau of California said a mid-range estimate of the annual cost of covering all essential workers in the state under a “conclusive presumption” was $11.2 billion, equal to “61 percent of the annual estimated cost of the total workers’ compensation system prior to the impact of the pandemic.”
The WCIRB estimated that the cost could be as low as $2.2 billion or as high $33.6 billion, depending on factors such as the number of claims and the cost of treatment. Business groups said the change was forcing businesses to be the “safety net to mitigate the unprecedented outcomes of this natural disaster and the government’s response.”
Another risk to businesses comes from the possibility that consumers will file lawsuits if they believe they contracted COVID-19 at a commercial establishment. Seventeen state lawmakers sent Newsom a letter this week asking him to take steps to limit liability for businesses that comply with safety standards, including providing “adequate access” to tests for their employees.
The idea of a “liability shield” has been raised in Congress as well, but House Democrats have been unwilling to consider this legal protection for businesses.
The unintended consequence of these brush-offs will be fewer businesses and fewer jobs. In other examples, Newsom has dismissed requests from business groups to delay the scheduled increase in the state’s minimum wage. He has so far refused requests to put a freeze on new rulemaking or to extend the public comment period on proposed regulations.
All of these policy choices have the effect of driving up costs and risks for businesses that are seeking to resume operations in California.
It is challenging enough to deal with the loss of revenue from months of forced closures, followed by projections of reduced revenue in the future due to social-distancing requirements that limit the number of customers. Business owners who have taken on debt or depleted savings face hard choices, and a long and uncertain road to economic recovery.
Newsom should be focusing on the preservation and restoration of jobs in the private sector. Policies that raise costs and cut revenues for employers will inevitably result in lower tax revenues to the state. This is counter-productive to the governor’s policy goals, the success of which ultimately depends on the recovery and continued strength of revenues from income, sales and corporate taxes.
(AP Photo/Rich Pedroncelli)
By THE EDITORIAL BOARD
