New Senate Bill Leaves Employers with Unexpected Insurance Costs

November 14, 2018 | Ryan Kagarakis

Senate Bill 1343 was approved on 9/30/2018 and requires employers with five or more employees to provide at least one hour of sexual harassment training to ALL nonsupervisory employees by January 1, 2020, and once every two years thereafter. The existing law requiring employees with supervisory roles to complete two hours of sexual harassment training every two years remains unchanged. This means that sexual harassment training is now required for all employees. Not only does this create an additional burden for employers but it will also have an impact on insurance premiums.

For employers in the construction and manufacturing industries, this means an additional hour of pay, workers’ compensation, general liability, and payroll taxes. Here is a breakdown of the potential insurance impact by policy type:

Workers’ Compensation

Employees in the construction industry are often times high-wage earners depending on their skill level and journeyman status. If you have a carpentry worker making $35 per hour they will be subject to workers’ compensation even if they are completing their sexual harassment training in the office. The workers’ compensation rating bureau consider all remuneration (compensation) to the employee as eligible payroll for workers’ compensation so the hour spent completing their training will also generate premiums. Depending on the total number of employees and your rates this can be a costly premium for the sexual harassment training.

General Liability

Some general liability insurance providers use employee payroll as their means of producing the annual premium for employers. The total payroll generated from conducting the sexual harassment training could potentially impact the premium for the general liability policy.

The purpose of this bill is to educate employees on sexual harassment and make the workplace a friendlier and safer environment. However, like most labor-related laws that are passed the execution of the bill creates a further burden on the employer. Along with the costs of paying for the employee to perform the training and the related insurance costs the employer also has to figure out a practical way to actually have the employees complete the training.

If you are a smaller employer and don’t have an office, where will you conduct the training? Will the employee have to perform the training at the jobsite? If you have an office will you need to buy a new computer to accommodate the training? Most employers don’t have extra computers laying around so a new one may have to be purchased in order to allow all the employees to complete the training.

Another factor to consider is whether to use the state-approved material from the Department of Fair Employment and Housing (DFEH) or to consult with your labor attorney and have them provide the training.

We firmly believe in the proper protection for employees but we also believe in the need for a fair balance between this regulation and the employer's ability to accommodate. As always, if you have specific questions regarding the rule or how it might apply to your organization please feel free to contact me, an attorney specializing in labor matters or your insurance representative.

Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733