BILL NUMBER: AB 2770	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 25, 2010
	PASSED THE ASSEMBLY  AUGUST 30, 2010
	AMENDED IN SENATE  AUGUST 18, 2010
	AMENDED IN ASSEMBLY  APRIL 13, 2010

INTRODUCED BY   Assembly Member Monning
   (Principal coauthor: Assembly Member Bill Berryhill)

                        MARCH 1, 2010

   An act to add and repeal Section 559 of the Labor Code, relating
to employment.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2770, Monning. Employee wages and working hours: violators.
   Existing law requires private employers to perform certain
activities with regard to employee wages, hours, and working
conditions.
   This bill would, until January 1, 2017, establish a pilot program
to investigate employment and payment practices within the swimming
pool and spa construction industry. The bill would require the
Employment Development Department, in consultation with the Franchise
Tax Board, the Department of Justice, the Department of Insurance,
the Labor and Workforce Development Agency, and industry
representatives, to develop and implement a set of criteria that, if
met by an employer, would trigger a recommendation for an audit or
investigation by appropriate state tax authorities to determine if
the employer is in violation of statutes relating to employee wages,
hours, and working conditions. After July 1, 2011, this bill would
require the Employment Development Department to take specified
actions with respect to an employer when application of the set of
criteria indicates that a violation of the statutes described above
may have occurred. This bill also would state findings and
declarations relating to the underground economy and the swimming
pool and spa construction industry.


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

  SECTION 1.  (a) The Legislature finds and declares all of the
following:
   (1) Despite many targeted enforcement efforts in recent years,
including the creation of the Economic and Employment Enforcement
Coalition, and the addition of 62 personnel years by the Governor in
2005 to specifically address the problem, evidence indicates that the
underground economy in California is flourishing.
   (2) According to the Employment Development Department's analysis
of findings of the Internal Revenue Service, the underground economy
in California is estimated to be between $60 billion and $140 billion
each year.
   (3) Employers operating in the underground economy hurt everyone;
the state loses billions of dollars each year in tax revenues,
workers are forced to go without basic employment protections, and
law-abiding businesses are confronted with unfair competition from
scofflaw competitors.
   (4) According to the Franchise Tax Board and the State Board of
Equalization, an average of $8.5 billion in owed corporate, personal,
and sales and use taxes goes uncollected in California each year,
with unreported and underreported economic activity responsible for
the vast majority of that total.
   (5) As the state faces unprecedented budget shortfalls, rigorous
enforcement of existing state tax laws should be a top priority.
   (6) It is therefore in the public interest to establish a more
coordinated approach to enforcement in the underground economy, which
would include a nexus between the state's enforcement of labor and
tax laws.
   (7) The construction industry has been particularly hard hit by
the underground economy, especially the swimming pool and spa
construction business, thus making it an appropriate industry to
serve as the subject of a pilot program to develop a more coordinated
approach to enforcement in the underground economy.
   (b) It is the intent of the Legislature in enacting this act to
target those employers that operate in the underground economy in
flagrant violation of law, and not employers that commit minor or
inadvertent violations of existing law.
  SEC. 2.  Section 559 is added to the Labor Code, to read:
   559.  (a) A pilot program is hereby established to investigate
employment and payment practices within the swimming pool and spa
construction industry.
   (b) The Employment Development Department, in consultation with
the Franchise Tax Board, the Department of Justice, the Department of
Insurance, the Labor and Workforce Development Agency, and industry
representatives, shall, by July 1, 2011, develop and implement an
appropriate set of criteria that, if met by an employer, will trigger
a recommendation for an audit or investigation by appropriate state
tax authorities to determine if the employer is in violation of this
chapter, Chapter 1 (commencing with Section 200) of Part 1, or
Chapter 1 (commencing with Section 1171) of Part 4. The set of
criteria shall take into account all relevant factors, including
reported workers' compensation exemptions and the ratio of building
material purchases to reported labor costs.
   (c) After July 1, 2011, the Employment Development Department
shall take the following actions with respect to an employer when
application of the set of criteria indicates that a violation of the
laws specified in subdivision (b) may have occurred:
   (1) Notify the appropriate state tax authorities.
   (2) Provide the appropriate state tax authorities with the name of
the employer and all relevant and necessary information regarding
the violations.
   (3) Make a recommendation to the appropriate state tax authorities
that the employer be audited or investigated.
   (d) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date.