BILL NUMBER: AB 3020	CHAPTERED
	BILL TEXT

	CHAPTER  685
	FILED WITH SECRETARY OF STATE  SEPTEMBER 22, 2004
	APPROVED BY GOVERNOR  SEPTEMBER 22, 2004
	PASSED THE ASSEMBLY  AUGUST 26, 2004
	PASSED THE SENATE  AUGUST 24, 2004
	AMENDED IN SENATE  AUGUST 23, 2004

INTRODUCED BY   Assembly Member Koretz
   (Principal coauthor:  Assembly Member Jerome Horton)
   (Coauthors:  Assembly Members Chu, Laird, and Mullin)

                        FEBRUARY 24, 2004

   An act to amend Sections 106, 1742, and 1742.1 of the Labor Code,
and to amend Section 329 of the Unemployment Insurance Code, relating
to employment.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 3020, Koretz.  Employment.
   Existing law establishes the Joint Enforcement Strike Force on the
Underground Economy to combat tax violations and cash-pay employment
and to report to the Legislature on the underground economy by June
30 of each year. Existing law further designates the Director of
Employment Development as the chairperson of the strike force and
authorizes employees of any of the agencies that participate in the
strike force to issue Labor Code citations and penalty assessment
orders to employers found in violation of the law. These provisions
are repealed by their own terms as of January 1, 2006.
   This bill would eliminate the repeal of these provisions.
   Existing law authorizes the imposition of civil wage and penalty
assessments against contractors and subcontractors that fail to pay
their workers the prevailing rate of per diem wages on a public work,
as specified. Existing law authorizes a contractor or subcontractor
against whom a civil wage or penalty assessment has been imposed to
request a hearing to review that assessment, as provided, and
requires, until January 1, 2005, the Director of Industrial Relations
to appoint a hearing officer for such a hearing.  On and after
January 1, 2005, existing law requires the Director of Industrial
Relations to appoint an administrative law judge for these hearings,
as provided.
   This bill would extend these dates by 2 years to instead require,
until January 1, 2007, the Director of Industrial Relations to
appoint a hearing officer for these hearings, and, on and after
January 1, 2007, to appoint an administrative law judge for these
hearings.  This bill also would make conforming changes related to
these provisions.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 106 of the Labor Code is amended to read:
   106.  (a) The Labor Commissioner may authorize an employee of any
of the agencies that participate in the Joint Enforcement Strike
Force on the Underground Economy, as defined in Section 329 of the
Unemployment Insurance Code, to issue citations pursuant to Sections
226.4 and 1022 and issue and serve a penalty assessment order
pursuant to subdivision (a) of Section 3722.
   (b) No employees shall issue citations or penalty assessment
orders pursuant to this section unless they have been specifically
designated, authorized, and trained by the Labor Commissioner for
this purpose.  Appeals of all citations or penalty assessment orders
shall follow the procedures prescribed in Section 226.5, 1023, or
3725, whichever is applicable.
  SEC. 2.  Section 1742 of the Labor Code, as added by Section 10 of
Chapter 954 of the Statutes of 2000, is amended to read:
   1742.  (a) An affected contractor or subcontractor may obtain
review of a civil wage and penalty assessment under this chapter by
transmitting a written request to the office of the Labor
Commissioner that appears on the assessment within 60 days after
service of the assessment.  If no hearing is requested within 60 days
after service of the assessment, the assessment shall become final.

   (b) Upon receipt of a timely request, a hearing shall be commenced
within 90 days before the director, who shall appoint an impartial
hearing officer possessing the qualifications of an administrative
law judge pursuant to subdivision (b) of Section 11502 of the
Government Code.  The appointed hearing officer shall be an employee
of the department, but shall not be an employee of the Division of
Labor Standards Enforcement.  The contractor or subcontractor shall
be provided an opportunity to review evidence to be utilized by the
Labor Commissioner at the hearing within 20 days of the receipt of
the written request for a hearing.  Any evidence obtained by the
Labor Commissioner subsequent to the 20-day cutoff shall be promptly
disclosed to the contractor or subcontractor.
   The contractor or subcontractor shall have the burden of proving
that the basis for the civil wage and penalty assessment is
incorrect.  The assessment shall be sufficiently detailed to provide
fair notice to the contractor or subcontractor of the issues at the
hearing.
   Within 45 days of the conclusion of the hearing, the director
shall issue a written decision affirming, modifying, or dismissing
the assessment.  The decision of the director shall consist of a
notice of findings, findings, and an order.  This decision shall be
served on all parties and the awarding body pursuant to Section 1013
of the Code of Civil Procedure by first-class mail at the last known
address of the party on file with the Labor Commissioner. Within 15
days of the issuance of the decision, the director may reconsider or
modify the decision to correct an error, except that a clerical error
may be corrected at any time.
   The director shall adopt regulations setting forth procedures for
hearings under this subdivision.
   (c) An affected contractor or subcontractor may obtain review of
the decision of the director by filing a petition for a writ of
mandate to the appropriate superior court pursuant to Section 1094.5
of the Code of Civil Procedure within 45 days after service of the
decision.  If no petition for writ of mandate is filed within 45 days
after service of the decision, the order shall become final.  If it
is claimed in a petition for writ of mandate that the findings are
not supported by the evidence, abuse of discretion is established if
the court determines that the findings are not supported by
substantial evidence in the light of the whole record.
   (d) A certified copy of a final order may be filed by the Labor
Commissioner in the office of the clerk of the superior court in any
county in which the affected contractor or subcontractor has property
or has or had a place of business.  The clerk, immediately upon the
filing, shall enter judgment for the state against the person
assessed in the amount shown on the certified order.
   (e) A judgment entered pursuant to this section shall bear the
same rate of interest and shall have the same effect as other
judgments and shall be given the same preference allowed by law on
other judgments rendered for claims for taxes.  The clerk shall not
charge for the service performed by him or her pursuant to this
section.
   (f) An awarding body that has withheld funds in response to a
civil wage and penalty assessment under this chapter shall, upon
receipt of a certified copy of a final order that is no longer
subject to judicial review, promptly transmit the withheld funds, up
to the amount of the certified order, to the Labor Commissioner.
   (g) This section shall provide the exclusive method for review of
a civil wage and penalty assessment by the Labor Commissioner under
this chapter or the decision of an awarding body to withhold contract
payments pursuant to Section 1771.5.
   (h) This section shall remain in effect only until January 1,
2007, and as of that date is repealed.
  SEC. 3.  Section 1742 of the Labor Code, as added by Section 11 of
Chapter 954 of the Statutes of 2000, is amended to read:
   1742.  (a) An affected contractor or subcontractor may obtain
review of a civil wage and penalty assessment under this chapter by
transmitting a written request to the office of the Labor
Commissioner that appears on the assessment within 60 days after
service of the assessment.  If no hearing is requested within 60 days
after service of the assessment, the assessment shall become final.

   (b) (1) Upon receipt of a timely request, a hearing shall be
commenced within 90 days before an administrative law judge appointed
by the Director of Industrial Relations.  The appointed hearing
judge shall be an employee of the department, but shall not be an
employee of the Division of Labor Standards Enforcement.  The
contractor or subcontractor shall be provided an opportunity to
review evidence to be utilized by the Labor Commissioner at the
hearing within 20 days of the receipt of the written request for a
hearing.  Any evidence obtained by the Labor Commissioner subsequent
to the 20-day cutoff shall be promptly disclosed to the contractor or
subcontractor.
   (2) The contractor or subcontractor shall have the burden of
proving that the basis for the civil wage and penalty assessment is
incorrect.  The assessment shall be sufficiently detailed to provide
fair notice to the contractor or subcontractor of the issues at the
hearing.
   (3) Within 45 days of the conclusion of the hearing, the
administrative law judge shall issue a written decision affirming,
modifying, or dismissing the assessment.  The decision of the
administrative law judge shall consist of a notice of findings,
findings, and an order.  This decision shall be served on all parties
and the awarding body pursuant to Section 1013 of the Code of Civil
Procedure by first-class mail at the last known address of the party
on file with the Labor Commissioner.  Within 15 days of the issuance
of the decision, the administrative law judge may reconsider or
modify the decision to correct an error, except that a clerical error
may be corrected at any time.
   (4) The Director of Industrial Relations shall adopt regulations
setting forth procedures for hearings under this subdivision.
   (c) An affected contractor or subcontractor may obtain review of
the decision of the administrative law judge by filing a petition for
a writ of mandate to the appropriate superior court pursuant to
Section 1094.5 of the Code of Civil Procedure within 45 days after
service of the decision.  If no petition for writ of mandate is filed
within 45 days after service of the decision, the order shall become
final.  If it is claimed in a petition for writ of mandate that the
findings are not supported by the evidence, abuse of discretion is
established if the court determines that the findings are not
supported by substantial evidence in the light of the whole record.
   (d) A certified copy of a final order may be filed by the Labor
Commissioner in the office of the clerk of the superior court in any
county in which the affected contractor or subcontractor has property
or has or had a place of business.  The clerk, immediately upon the
filing, shall enter judgment for the state against the person
assessed in the amount shown on the certified order.
   (e) A judgment entered pursuant to this section shall bear the
same rate of interest and shall have the same effect as other
judgments and shall be given the same preference allowed by law on
other judgments rendered for claims for taxes.  The clerk shall not
charge for the service performed by him or her pursuant to this
section.
   (f) An awarding body that has withheld funds in response to a
civil wage and penalty assessment under this chapter shall, upon
receipt of a certified copy of a final order that is no longer
subject to judicial review, promptly transmit the withheld funds, up
to the amount of the certified order, to the Labor Commissioner.
   (g) This section shall provide the exclusive method for review of
a civil wage and penalty assessment by the Labor Commissioner under
this chapter or the decision of an awarding body to withhold contract
payments pursuant to Section 1771.5.
   (h) This section shall become operative on January 1, 2007.
  SEC. 4.  Section 1742.1 of the Labor Code, as added by Section 12
of Chapter 954 of the Statutes of 2000, is amended to read:
   1742.1.  (a) After 60 days following the service of a civil wage
and penalty assessment under Section 1741 or a notice of withholding
under subdivision (a) of Section 1771.6, the affected contractor,
subcontractor, and surety on a bond or bonds issued to secure the
payment of wages covered by the assessment or notice shall be liable
for liquidated damages in an amount equal to the wages, or portion
thereof, that still remain unpaid.  If the assessment or notice
subsequently is overturned or modified after administrative or
judicial review, liquidated damages shall be payable only on the
wages found to be due and unpaid.  If the contractor or subcontractor
demonstrates to the satisfaction of the director that he or she had
substantial grounds for believing the assessment or notice to be in
error, the director shall waive payment of the liquidated damages.
Any liquidated damages collected shall be distributed to the employee
along with the unpaid wages.  Section 203.5 shall not apply to
claims for prevailing wages under this chapter.
   (b) The Labor Commissioner shall, upon receipt of a request from
the affected contractor or subcontractor within 30 days following the
service of a civil wage and penalty assessment under Section 1741,
afford the contractor or subcontractor the opportunity to meet with
the Labor Commissioner or his or her designee to attempt to settle a
dispute regarding the assessment without the need for formal
proceedings.  The awarding body shall, upon receipt of a request from
the affected contractor or subcontractor within 30 days following
the service of a notice of withholding under subdivision (a) of
Section 1771.6, afford the contractor or subcontractor the
opportunity to meet with the designee of the awarding body to attempt
to settle a dispute regarding the notice without the need for formal
proceedings.  The settlement meeting may be held in person or by
telephone and shall take place before the expiration of the 60-day
period for seeking administrative review.  No evidence of anything
said or any admission made for the purpose of, in the course of, or
pursuant to, the settlement meeting is admissible or subject to
discovery in any administrative or civil proceeding.  No writing
prepared for the purpose of, in the course of, or pursuant to, the
settlement meeting, other than a final settlement agreement, is
admissible or subject to discovery in any administrative or civil
proceeding.  The assessment or notice shall advise the contractor or
subcontractor of the opportunity to request a settlement meeting.
   (c) This section shall remain in effect only until January 1,
2007, and as of that date is repealed.
  SEC. 5.  Section 1742.1 of the Labor Code, as added by Section 13
of Chapter 954 of the Statutes of 2000, is amended to read:
   1742.1.  (a) After 60 days following the service of a civil wage
and penalty assessment under Section 1741 or a notice of withholding
under subdivision (a) of Section 1771.6, the affected contractor,
subcontractor, and surety on a bond or bonds issued to secure the
payment of wages covered by the assessment or notice shall be liable
for liquidated damages in an amount equal to the wages, or portion
thereof, that still remain unpaid.  If the assessment or notice
subsequently is overturned or modified after administrative or
judicial review, liquidated damages shall be payable only on the
wages found to be due and unpaid.  If the contractor or subcontractor
demonstrates to the satisfaction of the administrative law judge
that he or she had substantial grounds for believing the assessment
or notice to be in error, the administrative law judge shall waive
payment of the liquidated damages.  Any liquidated damages collected
shall be distributed to the employee along with the unpaid wages.
Section 203.5 shall not apply to claims for prevailing wages under
this chapter.
   (b) The Labor Commissioner shall, upon receipt of a request from
the affected contractor or subcontractor within 30 days following the
service of a civil wage and penalty assessment under Section 1741,
afford the contractor or subcontractor the opportunity to meet with
the Labor Commissioner or his or her designee to attempt to settle a
dispute regarding the assessment without the need for formal
proceedings.  The awarding body shall, upon receipt of a request from
the affected contractor or subcontractor within 30 days following
the service of a notice of withholding under subdivision (a) of
Section 1771.6, afford the contractor or subcontractor the
opportunity to meet with the designee of the awarding body to attempt
to settle a dispute regarding the notice without the need for formal
proceedings.  The settlement meeting may be held in person or by
telephone and shall take place before the expiration of the 60-day
period for seeking administrative review.  No evidence of anything
said or any admission made for the purpose of, in the course of, or
pursuant to, the settlement meeting is admissible or subject to
discovery in any administrative or civil proceeding.  No writing
prepared for the purpose of, in the course of, or pursuant to, the
settlement meeting, other than a final settlement agreement, is
admissible or subject to discovery in any administrative or civil
proceeding.  The assessment or notice shall advise the contractor or
subcontractor of the opportunity to request a settlement meeting.
   (c) This section shall become operative on January 1, 2007.
  SEC. 6.  Section 329 of the Unemployment Insurance Code is amended
to read:
   329.  (a) The director, or his or her designee, shall serve as
Chairperson of the Joint Enforcement Strike Force on the Underground
Economy provided for in Executive Order W-66-93.  The strike force
shall include, but not be limited to, representatives of the
Employment Development Department, the Department of Consumer
Affairs, the Department of Industrial Relations, the Department of
Insurance, and the Office of Criminal Justice Planning. Other
agencies that are not part of the administration, such as the
Franchise Tax Board, the State Board of Equalization, and the
Department of Justice, are encouraged to participate in the strike
force.
   (b) The strike force shall have the following duties:
   (1) To facilitate and encourage the development and sharing of
information by the participating agencies necessary to combat the
underground economy.
   (2) To improve the coordination of activities among the
participating agencies.
   (3) To develop methods to pool, focus, and target the enforcement
resources of the participating agencies in order to deter tax evasion
and maximize recoveries from blatant tax evaders and violators of
cash-pay reporting laws.
   (4) To reduce enforcement costs wherever possible by eliminating
duplicative audits and investigations.
   (c) In addition, the strike force shall be empowered to:
   (1) Form joint enforcement teams when appropriate to utilize the
collective investigative and enforcement capabilities of the
participating members.
   (2) Establish committees and rules of procedure to carry out the
activities of the strike force.
   (3) To solicit the cooperation and participation of district
attorneys and other state and local agencies in carrying out the
objectives of the strike force.
   (4) Establish procedures for soliciting referrals from the public,
including, but not limited to, an advertised telephone hotline.
   (5) Develop procedures for improved information sharing among the
participating agencies, such as shared automated information database
systems, the use of a common business identification number, and a
centralized debt collection system.
   (6) Develop procedures to permit the participating agencies to use
more efficient and effective civil sanctions in lieu of criminal
actions wherever possible.
   (7) Evaluate, based on its activities, the need for any statutory
change to do any of the following:
   (A) Eliminate barriers to interagency information sharing.
   (B) Improve the ability of the participating agencies to audit,
investigate, and prosecute tax and cash-pay violations.
   (C) Deter violations and improve voluntary compliance.
   (D) Eliminate duplication and improve cooperation among the
participating agencies.
   (E) Establish shareable information databases.
   (F) Establish a common business identification number for use by
participating agencies.
   (G) Establish centralized, automated debt collection services for
the participating agencies.
   (H) Strengthen civil penalty procedures to allow the strike force
to emphasize civil rather than criminal penalties wherever possible.

   (d) The strike force shall report to the Governor and the
Legislature annually during the period of its existence, by June 30,
of each year, regarding its activities.
   The report shall include, but not be limited to, all of the
following:
   (1) The number of cases of blatant violations and noncompliance
with tax and cash-pay laws identified, audited, investigated, or
prosecuted through civil action or referred for criminal prosecution.

   (2) Actions taken by the strike force to publicize its activities.

   (3) Efforts made by the strike force to establish an advertised
telephone hotline for receiving referrals from the public.
   (4) Procedures for improving information sharing among the
agencies represented on the strike force.
   (5) Steps taken by the strike force to improve cooperation among
participating agencies, reduce duplication of effort, and improve
voluntary compliance.
   (6) Recommendations for any statutory changes needed to accomplish
the goals described in paragraph (7) of subdivision (c).