BILL ANALYSIS Senate Committee on Labor and Industrial Relations Mark DeSaulnier, Chair Date of Hearing: April 29, 2009 2009-2010 Regular Session Consultant: Alma Perez Fiscal:Yes Urgency: No Bill No: SB 677 Author: Yee Version: As introduced February 27, 2009 SUBJECT Workers' compensation: exclusions: farming operations. KEY ISSUE Should a certain industry be exempt from having to comply with the workers' compensation requirements if its only employees are specified family members? PURPOSE To exempt specified farming operations from the requirement of having to provide workers' compensation insurance for specified family members. ANALYSIS Existing law requires employers to secure the payment of workers' compensation for injuries incurred by their employees that arise out of, or in the course of, employment. Workers' compensation insurance provides six basic benefits which include medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits or vocational rehabilitation and death benefits. Failure to maintain workers' compensation coverage can result in an order prohibiting the employer from using employee labor, liability for employee benefits, and assessments of other penalties. Under existing law, employers are required to secure the payment of workers' compensation insurance either by being insured by one or more insurers duly authorized to write compensation insurance in this state or by securing from the Director of Industrial Relations a certificate of consent to self-insure. The Self Insurance Plans (SIP) program, within the Department of Industrial Relations (DIR), authorizes qualified employers to provide their own coverage for workers' compensation liabilities. Existing law , however, excludes various persons from the definition of employee for purposes of securing the payment of workers' compensation. Some of the workers excluded from workers' compensation requirements include: Any person employed by the owner or occupant of a residential dwelling whose duties are incidental to the ownerships, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, profession, or occupation of the owner or occupant. This includes any person who is employed by his or her parent, spouse, or child; Self-employed persons; Volunteers for a public agency or a private, nonprofit organization and certain recreational camps, except certain public safety personnel; Deputy clerk, sheriffs or constable appointed for their own convenience without compensation; Ski-lift operators participating in recreational activities and uncompensated ski patrol; Participants in sports/athletics without compensation, students in amateur sporting events and certain sports officials at nonprofessional events; Persons performing services in return for aid from religious, charitable or relief organizations; Certain out-of-state law enforcement personnel deputized to work or acting as peace officers in California; and Independent contractors. This Bill would add to the list of those excluded from workers' compensation requirements any person employed by his or her Hearing Date: April 29, 2009 SB 677 Consultant: Alma Perez Page 2 Senate Committee on Labor and Industrial Relations registered domestic partner, or by the spouse or registered domestic partner of his or her parent or child -- adding to the current exclusion applying to a person employed by a parent, spouse, or child -- in a farming operation that is registered with the director or the director's designee and meets specified conditions. Specifically, this bill would: Apply to farming operations wholly owned by one or more of the family members described and conducted on land that is owned by, or leased to, the same owners. Eligibility is limited to farms whose taxable income does not exceed $10,000 per year. Require the owner(s) of the farming operation to provide health insurance for all family members working on the farm. Allow the farming operation to register with the director of DIR for a one year period of exclusion and require that they provide to the director, among other things, proof of the health insurance being provided, of the owner(s) taxable income, the names and ages of all persons employed on the farm, and proof that the owner(s) cannot afford the workers' compensation policy premium. Specify that the owner(s) of the farming operation must be in compliance with all other applicable provisions of the Labor Code; violations of the code and specified requirements would deem the farming operation as failing to secure the payment of workers' compensation and would subject the farm to applicable penalties. Provide that violations of specified conditions constitute good cause for the director or the director's designee to cancel the farming operation's registration. Lastly, the bill would provide that the information required from the owner(s) of the farming operation for registration with the director or the director's designee shall become public record, with the exception of tax returns and social security Hearing Date: April 29, 2009 SB 677 Consultant: Alma Perez Page 3 Senate Committee on Labor and Industrial Relations numbers. COMMENTS 1. Need for this bill? The workers' compensation insurance system was created to provide employees with medical treatment in the event that a worker suffers an on-the-job injury. Existing law requires that employers secure the payment of workers' compensation insurance; however, there are several exclusions to this requirement including, among others, those who are self-employed, volunteers, or persons employed by the owner or occupant of a residential dwelling. This includes any person employed by a parent, spouse or child. This bill would add a farming operation employing immediate family members, including the registered domestic partner or the spouse or registered domestic partner of his or her parent or child, to the list of those excluded from having to provide workers' compensation. According to the UC Cooperative Extension, in 2005 and 2008, individual Hmong and Hispanic farmers were fined between $14,000 and $26,000 each for not complying with the workers' compensation law. The UC Cooperative Extension declares that a small farmer can purchase a simple workers' compensation policy for as little as $460 to provide coverage for their employees, and to forestall the $1,000 per worker fine for not having a policy in place. However, a recent article cited that the income of minority farmers in Fresno County, for example, averages somewhere between $10,000 and $15,000. This bill would help those small farming operations avoid further citations for non compliance with the workers' compensation law if they operate with the help of their immediate family members, as specified, and can meet specific requirements. 2. Proponent Arguments : According to proponents, Fresno County is home to over 6,081 farms, with about 3,760 of those farms grossing less than $100,000. As indicated by the author, a 2004 multi-agency Hearing Date: April 29, 2009 SB 677 Consultant: Alma Perez Page 4 Senate Committee on Labor and Industrial Relations enforcement sweep of Southeast Asian growers in the Fresno area resulted in some farmers being fined between $14,000 and $25,000 for various violations, including the failure to secure the payment of workers' compensation insurance. Proponents claim that many refugee farmers grow on rented land and cannot often afford to hire outside labor, therefore having to rely on immediate and extended family for assistance in gathering the crops without getting paid for their work. Proponents of the measure argue that farmers can't afford the coverage of workers' compensation and are often unaware of the regulations until they are hit with big fines. According to the author, after the 2004 sweep nearly 50 Hmong farmers stopped working their farms for fear of being fined. Proponents argue that minimally, the cost for workers' compensation insurance for a small farming operation can be $600, but it can run into the thousands of dollars, a cost that these very small farms cannot afford. The author argues that these small family operated farms need to be excluded from workers' compensation insurance requirements that they cannot afford to pay. The author states that of the state's 81,000 farms only 7,000 earn less than $10,000 which would qualify them for the exclusion provided in this bill. The author estimates that the actual number of farm owner(s) who would likely sign up for the exclusion would likely be much lower, in Fresno county alone about 600 Southeast Asian growers would probably consider the program. 3. Neutral Position Arguments : Several groups have taken a neutral position on the bill arguing that, although they generally oppose any exemption from an employer's obligation to procure workers' compensation insurance for employees, that they appreciate the fact that the author of this bill drafted language carefully in order to address several concerns raised to ensure both sufficient worker protections and a very limited and narrow scope. Some were particularly concerned with the fact that regardless of whether an employer was exempted from workers' compensation Hearing Date: April 29, 2009 SB 677 Consultant: Alma Perez Page 5 Senate Committee on Labor and Industrial Relations obligations, accidents would undoubtedly continue to occur, particularly in an industry as inherently dangerous as agriculture. Accordingly it was imperative that health insurance be provided by the employer, and that proof of such insurance, along with proof of an accident free work place be provided to DIR prior to the exemption being granted, and annually by employers seeking to renew their exemption. Additionally, some groups wanted to ensure that the bill was limited in applicability only to truly small family farms, employing only immediate family members. This bill addresses these concerns as well by limiting eligibility to farm operations with $10,000 taxable income per year, by enumerating the list of immediate family members which may be employed on the farm, and by clarifying that no other non-immediate family member employees may be employed by the employer during the period of exemption. Finally, the bill ensures that there is a review process to guarantee that employers who are granted the exemption can be deemed ineligible at anytime if any labor laws are violated or the specified requirements are not met. 4. Opponent Arguments : According to opponents of the measure, farm workers toil in some of the most dangerous conditions of any industry. They argue that a majority of the 80,000 farms in California are family owned, and unfortunately, over half of all farm worker protection violations have been found on these family owned farms. Opponents believe that all farm workers regardless of race, ethnicity, religion, political asylum and refugee status or family affiliation have the right to the protections under the law. Opponents argue that to provide no safety net for family members working on the majority of California's farms means that injured workers won't have access to medical treatment free of out of pocket expenses or any form of wage replacement if they cannot return to work. They believe that this bill allows current farm worker protections to be at the mercy of the state's broken enforcement system, with no adequate funding, placing more farm worker lives in danger of serious Hearing Date: April 29, 2009 SB 677 Consultant: Alma Perez Page 6 Senate Committee on Labor and Industrial Relations bodily harm and death. Opponents argue that there is sufficient evidence that the state does not have the funding necessary to enforce current labor laws. They argue that last year alone, six farm workers lost their lives due to the state's lack of enforcement of the heat regulation. In addition, they cite that in 2007 alone, for over 3 million employers, there were only 7,883 employer inspections across the state and only 537 in the agricultural sector. With enforcement efforts already under funded, opponents believe that this is not the time to be creating loopholes and exemptions to the law. 5. Prior Legislation : SB 452 (Cogdill) of 2007: Hearing in Sen. Labor Committee canceled at author's request. This bill sought to exclude family members, including parents, children, grandparents, aunts, or first or second cousins, working on family-owned farms from workers' compensation requirements under the law. The bill limited eligibility to farms generating less than $100,000 per year in total taxable income. SUPPORT Blong Xiong, City of Fresno Council Member, District 1 CAFF Community Alliance with Family Farmers Community Alliance with Family Farmers (CAFF) Fresno County Farm Bureau (FCFB) Hmong Leadership Network of San Joaquin Individual signed forms 150 National Hmong American Farmers, Inc. National Immigrant Farming Initiative NEUTRAL California Labor Federation, AFL-CIO California Teamsters Public Affairs Council United Food and Commercial Workers Union, Western States Council Hearing Date: April 29, 2009 SB 677 Consultant: Alma Perez Page 7 Senate Committee on Labor and Industrial Relations OPPOSITION United Farm Workers Hearing Date: April 29, 2009 SB 677 Consultant: Alma Perez Page 8 Senate Committee on Labor and Industrial Relations