Legislators are active on HOAs this year, and eight bills could have a significant impact on California associations. Four helpful bills were discussed in last week’s column. Unfortunately, the four bills discussed below are well-intentioned, but potentially create more problems than they solve.

The worst of the four is House Bill 572, authored by San Francisco Rep. Matt Haney. AB 572 would limit tax increases for deed-restricted affordable housing units and limit the HOA board to a maximum increase of 5 percent for those units. If the HOA needed to increase all units’ ratings by more than 5 percent, it would require a member vote to do so. This bill attempts to protect owners of affordable housing units, but it’s a terrible idea. It presents affordable housing as a distinct class of homeowners who would pay a smaller portion of their fair share of the cost of HOA than their neighbors. It would arguably override most CC&Rs, which normally specifically regulate the distribution of reviews among owners.

Assembly Bill 1033, authored by Rep. Phil Ting of San Francisco, proposes a simple but potentially problematic amendment to Section 65852.2 of the Government Code, the section on municipal approval of additional housing units (“ADUs”). The bill authorizes local jurisdictions to allow property owners (including owners of proposed developments) to convert their properties into miniature condos, allowing both the primary residence and the ADU(s) on the property to be sold to buyers. Fortunately, the bill does not say that it would override the CC&Rs for proposed developments, because if it did override CC&Rs, it would essentially allow for a rewrite of the subdivision map on which to base proposed developments. In the new condominium mini-condo scenario within a proposed development, would there now be other proposed members of a development association? Additionally, many (if not most) small homeowners’ associations ignore the Davis-Stirling Act, so it doesn’t help homebuyers create more.

Assembly Bill 1572 was authored by Rep. Laura Friedman of Burbank. This bill proposes the creation of a new subsection 10608.14 of the Water Code that would ban all property owners (other than single-family homes) from using potable water on “non-functional lawns” beginning in early 2029. For larger homes, this could mean extensive plumbing and landscaping costs to irrigate green belts or other common areas that are considered “non-functional”. This could also mean major problems and costs for the HOA and the community in areas where treated water is not currently available.

Senate Bill 403, authored by Sen. Aisha Wahab of Fremont, would outlaw discrimination on the basis of “caste,” defined as “a person’s perceived position in a system of social stratification based on inherited status.” In North American culture, caste is not usually recognized. This very broad definition could lead to misunderstandings and misapplications within neighborhoods. Does someone shy away from social interaction because someone else comes from a more modest background or perhaps has a more privileged upbringing? Although such behavior is superficial and ignorant, should it be illegal? It seems problematic to take a practice from another culture and try to define, understand and prohibit it in our North American culture.

The deadline for the First House to pass bills is June 2. So you have time to contact your representative and give your opinion. Visit www.leginfo.legislature.ca.gov to read the bills and leave comments for the author.

Kelly G Richardson, Esq. is a Fellow of the College of Community Association Lawyers and a partner in Richardson Ober LLP, a California law firm known for its community association expertise. Send column questions to Kelly@roattorneys.com. Previous columns at www.HOAHomefront.com.

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If a plumber is called to fix a problem at an HOA, is he now an Assembly Bill 5 employee rather than a contractor? Not necessarily, but there are problems. (iStockphoto)

Traditionally, many companies hire part-time or casual workers and refer to them as “independent contractors.” The IRS and the State Franchise Tax Board had guidelines to determine who is an employee and who can fairly be called an independent contractor. There were many factors that played a role in this characterization.

HOAs often hire what they consider “independent contractors” to perform specific maintenance, repair, or other routine tasks. This avoided wage tax deductions and other legal obligations.

All that began to change in 2018 with a case called Dynamex in the California Supreme Court, which replaced the traditional test of employment versus the independent contractor with a simple three-part test, often referred to as the “ABC” test. That ruling was included in Assembly Bill 5, which Gov. Gavin Newsom signed into law after the passage of the legislature.

AB 5 creates a new Labor Code section 2750.3 and affects all hirers, including HOAs, who use “independent contractors” who may be reclassified as “employees”. This new law adopts the “ABC” test, which categorizes an employee as an independent contractor if: A) the hirer does not actually and contractually control or direct the individual in the course of their work; B) The work performed is outside the borrower’s normal business; and C) The worker also normally and independently performs that work for others.

If the hired person meets the three requirements, they can be treated as an independent contractor. As ever, the element of control over how the person does their work is key.

Some HOA service providers are specifically exempt from the law, such as lawyers, architects, engineers and accountants. The more relevant area for clubs are employed people who work on the HOA property and are paid by the HOA.

An example of an independent contractor would be the plumber called in to fix a leak. The plumber is not supervised or instructed on how to perform the repair. The plumber usually works for others as well, and HOA’s business is not plumbing.

On the other hand, a less clear answer might apply to maintenance or janitorial workers paid by the HOA. Such workers are often directed by the manager or board of directors. Since HOA’s job is to maintain the common area, isn’t general property maintenance and cleaning part of HOA’s “business”?

Conversion of employees to employee status may result in sick leave and other obligations for the HOA, including payroll withholding levies. An employee might try to challenge their termination or claim discrimination. In addition, employees are subject to fair employment and wage and hour laws. Associations should consult their insurance broker for workers’ compensation coverage.

There will be public resources to educate HOAs and managers on the difference between employee and independent contractor status. The California Department of Industrial Relations is developing a website, but it is not ready yet. The California Chamber of Commerce provides information at calchamber.com.

Managers and their boards should be aware of the simpler standard and avoid misrepresenting workers as “independent contractors” where the law does not support that status. Also remember that staff (employee) discussions are intended for closed sessions, while independent contractors are vendors and should be discussed in open sessions.

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a partner in Richardson|Ober|DeNichilo LLP, a California law firm known for advising community associations. Send questions to Kelly@rodllp.com.

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