California personal income taxes

Two-thirds of California's overall tax revenue comes from personal income taxes, with the top fifth of income earners paying 90% - and the top one percent paying 45% - of these taxes.

Source: The tax man cometh, and California rich – getting richer – pay most

See how California compares to other U.S. states, including the seven that have no personal income tax, here:
2016 Top State Marginal Income Tax Rates.

State of the San Francisco and Los Angeles, California Legal Markets 2015 / 2016

A recent survey of 15,000 California lawyers uncovered the following statistics concerning the Los Angeles and San Francisco legal markets and the lawyers who work there:

New business growth slowed by 16 percent in Los Angeles and 26 percent in San Francisco; however, growth in Los Angeles (2.7 percent) was still lower than San Francisco (6.7 percent) in 2015;

Los Angeles has one lawyer per 23 businesses, while San Francisco has one lawyer per eight businesses;

Growth in the number of newly barred attorneys in 2015 was comparable in Los Angeles (1.6 percent) and San Francisco (1.4 percent);

The number of newly barred attorneys across all of California in 2015 was the lowest it has been in 10 years;

Hourly billing rates are slightly higher in Los Angeles (on average $302 - $410) than in San Francisco (on average $293 - $408); and

Customer satisfaction with legal services in both Los Angeles (86 percent) and San Francisco (84 percent) is slightly higher than the California average (82 percent).

Source: UpCounsel's 2016 Los Angeles Business Law Report.

2016 California Minimum Wage Increase

California has implemented legislation that is slated to increase the state minimum wage to $10.50 for larger employers on January 1, 2017, with employers of 25 or less employees following behind a year later. Further annual increases will push the state's minimum wage to $15.00 per hour by year 2022.

That is, unless the law's economic downturn provisions delay the implementation of the increases. After the $15.00 level is reached in 2022 (2023 for small employers) - or later if the governor delays implementation of the increases - then further increases tied to inflation will occur automatically.

Either way, Los Angeles' minimum wage law will increase the city minimum wage to $10.50 on July 1, 2016, with phased increases to $15.00 by 2020, and a similar Los Angeles County law will do the same thing outside of city limits.

The current California minimum wage can always be viewed on the Department of Industrial Relations website. Employers must generally comply with the highest of the U.S. federal, California state, or local city minimum wage where their employees work.

Jerry Brown Signs $15 Minimum Wage in California, Sacramento Bee, April 4, 2016:

California and New York become first states to commit to $15 minimum wage;

Bill expected to avert costly November ballot measure fight;

Labor unions celebrate, while Republicans and business groups groan

Hillay Clinton Calls for Estate Tax Increase

As part of her campaign, Democratic candidate for president Hillary Clinton has called for increasing the estate tax rate and the number of estates the tax would apply to. Specifically, her proposal calls for reducing the individual estate and gift tax exemption from its current level of $5.45 million to $3.5 million, and raising the estate tax rate from 40% to 45%.

President Obama has supported similar tax increases, but a Republican Congress has not enacted them.

Some estate planning techniques that critics term loopholes would remain under her plan, including some she and Bill Clinton have used themselves.

Form Operating Agreements Not Recommended For Multi-Member LLCs

New York "business divorce" lawyer Peter Mahler blogs about his experiences involving two members of a New York limited liability company who relied on LegalZoom to draft their LLC's operating agreement. New York's LLC act differs from California's, but the key takeaways may be the same for Californians considering entering into a partnership based on an online, cookie-cutter document:

[When] the members’ relationship turned bitter .... shortcomings in the operating agreement also contributed significantly to the parties’ legal postures and willingness to risk litigation.... I’m not suggesting that every lawyer-drafted LLC agreement is a model of perfection, but I found it incredible ... that a standard form operating agreement being sold online by a major company to the unknowing public as a more affordable alternative to using a lawyer could suffer from such a fundamental flaw that, in the end, only intensified the parties’ legal conflict.

Independent Contractors Versus Employees in California

The California Labor Commissioner has determined than a driver for Uber was misclassified as an independent contractor rather than as an employee.  The decision is under appeal and will not therefore immediately affect Uber's operations in California, although it could lead to more similar claims against them inside and outside of California, as well as more claims of misclassification by nominal independent contractors of other California companies.

Uber's assertion, if correct, that similar claims have been rejected in five other states highlights California's pro-employee labor laws.

The decision is a reminder that California small businesses desiring to keep or engage independent contractors need to do so only after consulting with an employment law attorney and implementing policies, procedures, and agreements that support the proper classification of the workers as "ICs" rather than "EEs".  In some circumstances, this won't be possible, and the workers will need to be hired as employees, or - if already working as independent contractors - converted to employees.

New California Laws for 2015

California's many new laws for 2015 include some of interest to employers, including local minimum wage increases in Richmond, San Jose, and other California cities and mandatory paid sick leave starting in July.