BILL NUMBER: AB 1643 CHAPTERED 09/28/04 CHAPTER 828 FILED WITH SECRETARY OF STATE SEPTEMBER 28, 2004 APPROVED BY GOVERNOR SEPTEMBER 28, 2004 PASSED THE ASSEMBLY AUGUST 25, 2004 PASSED THE SENATE AUGUST 24, 2004 AMENDED IN SENATE AUGUST 23, 2004 AMENDED IN SENATE AUGUST 17, 2004 AMENDED IN SENATE AUGUST 5, 2004 AMENDED IN SENATE JUNE 29, 2004 AMENDED IN SENATE APRIL 19, 2004 AMENDED IN ASSEMBLY JANUARY 5, 2004 AMENDED IN ASSEMBLY MAY 7, 2003 AMENDED IN ASSEMBLY APRIL 8, 2003 INTRODUCED BY Assembly Member Ridley-Thomas (Coauthors: Assembly Members Kehoe, Lieber, and Montanez) (Coauthor: Senator Alarcon) FEBRUARY 21, 2003 An act to amend Section 1231 of the Unemployment Insurance Code, relating to employment. LEGISLATIVE COUNSEL'S DIGEST AB 1643, Ridley-Thomas. Employment. Under existing law, for purposes of determining eligibility for unemployment and disability compensation benefits, a worker is an employee, and not an independent contractor, unless satisfactory proof, as specified, of independent contractor status exists. Existing law, relating to unemployment and disability compensation benefits, requires the Employment Development Department to develop and implement a taxpayer education and information program, which would include participation in small business seminars and similar programs organized by state and local agencies, as specified. This bill would additionally require the department to develop small business educational events and materials that explain the process of the department's determination of whether an individual is an employee or independent contractor, as specified. This bill would also require the Employment Development Department to collect data and submit a report for the period from January 1, 2005, to December 1, 2005, on Employment Development Department determinations involving small business owners, as defined, in the course of processing claims for unemployment insurance or disability insurance benefits, as specified, and the length of time that the department took to make a final determination in each case. The bill would further require the department to report its findings and any recommendations to the Legislature no later than July 1, 2006, and to conduct the study and report within the department's existing resources. This bill would make findings and declarations of the Legislature' s intent to determine the impact of existing regulations on small business owners. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares all of the following: (1) A vibrant and growing small business sector is critical to creating jobs in a dynamic economy. (2) The complexity and lack of clarity of many regulations put small businesses, which do not have the resources to hire experts to assist them, at a distinct disadvantage. (3) The failure to recognize differences in the scale and resources of regulated businesses can adversely affect competition in the marketplace, discourage innovation, and restrict improvements in productivity. (4) The practice of treating all regulated businesses as equivalent may lead to inefficient use of regulatory agency resources, enforcement problems, and, in some cases, to actions inconsistent with the legislative intent of health, safety, environmental, and economic welfare legislation. (5) Alternative regulatory approaches that do not conflict with the stated objective of applicable statutes may be available to minimize the significant economic impact of rules on small business. (6) It is the intent of the Legislature to study data collected by the Employment Development Department in order to assess the impact existing regulations have on the ability of small businesses and microbusinesses to effectively conduct business in California and protect workers in California. (7) It is further the intent of the Legislature to benefit small business by clarifying the Employment Development Department's development and implementation of taxpayer education programs that provide taxpayers with a better understanding of complicated procedures and regulations. (b) For the period from January 1, 2005, to December 1, 2005, the Employment Development Department shall collect data on the following, taken from a random sampling of 20 percent of the total amount of claims for unemployment insurance or disability insurance benefits submitted by owners of small businesses, as defined in paragraph (1) of subdivision (d) of Section 14837 of the Government Code: (1) The total number of times, in the course of processing a claim for unemployment insurance or disability insurance benefits, that an owner of a small business objected to the department's determination that a worker was an employee. (2) The total number of times, in the course of processing a claim for unemployment insurance or disability insurance benefits, that an owner of a small business was determined by the department not to be the employer of a worker. (3) The length of time that the department took to make a final determination in each case described in paragraph (1) or (2). (c) The department shall report its findings and any recommendations to the Legislature no later than July 1, 2006. (d) The department shall conduct the study and report required by this act with existing resources of the department. SEC. 2. Section 1231 of the Unemployment Insurance Code is amended to read: 1231. (a) The department shall develop and implement a taxpayer education and information program directed at, but not limited to, the following: (1) Taxpayer or industry groups. (2) Department audit and compliance staff. (3) (A) Identifying forms, procedures, regulations, or laws that are confusing and lead to taxpayer errors. (B) Taking appropriate action, including recommending remedial legislation to change those items identified pursuant to subparagraph (A). (b) The education and information program described in subdivision (a) shall include all of the following: (1) Communication with the taxpayer or industry groups which explains in simplified terms the most common errors made by taxpayers and how those errors may be avoided or corrected. (2) Participation in small business seminars and similar programs organized by state and local agencies and may include participation in seminars organized by private organizations. (3) In cooperation with the small business community, development of small business educational events and materials that explain, in simplified terms, the process of the department's determination of whether an individual is an employee or an independent contractor. These events and materials shall be designed to address potential tax and labor law issues that may arise when small businesses contract with microbusinesses in the production and delivery of products and services. (4) Revision of taxpayer educational materials currently produced by the department to explain in simplified terms the most common errors made by taxpayers and how those errors may be avoided or corrected. (5) Implementation of a continuing education program for audit personnel to include the application of new legislation to taxpayer activities and to minimize recurrent taxpayer noncompliance or inconsistency of administration.