BILL ANALYSIS Ó
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1794|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 1794
Author: Williams (D)
Amended: 8/23/12 in Senate
Vote: 21
SENATE LABOR & INDUST. RELATIONS COMM. : 5-0, 6/27/12
AYES: Lieu, DeSaulnier, Leno, Padilla, Yee
NO VOTE RECORDED: Wyland, Runner
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 57-20, 5/30/12 - See last page for vote
SUBJECT : Unemployment insurance: use of employer
reports: reporting and payroll: enforcement
SOURCE : California State Council of Laborers
DIGEST : This bill (1) authorizes the Employment
Development Department (EDD) to provide the specific new
employee information to the Joint Enforcement Strike Force
(JESF) on the Underground Economy, the Contractors State
License Board (CSLB), and the State Compensation Insurance
Fund (SCIF), (2) permits the EDD, the CSLB, and the SCIF to
share the new hire information for the purposes of
auditing, investigating, and prosecuting violations of tax
and cash-pay reporting laws, (3) extends the sunset date,
to January 1, 2019, of the expanded contractor payroll
audit provision, and (4) directs that the specified
requirements under the memorandum of understanding
CONTINUED
AB 1794
Page
2
regarding the administration and enforcement of the
reporting and payroll duties relating to contractors are to
be executed on or before July 1, 2013. This bill contains
double-jointing language with AB 1845 (Solorio).
Senate Floor Amendments of 8/23/12 add language
triple-jointing the overlapping provisions of AB 1794
(Williams), AB 174 (Monning), and AB 1845 (Solorio). All
three bills amend the same code section - Unemployment
Insurance Code Section 1088.5.
ANALYSIS : Existing law provides for the licensing and
regulation of contractors by the CSLB. Also, it provides
for the payment of unemployment compensation benefits to
eligible unemployed individuals, and requires the EDD to
implement and administer the unemployment insurance system
in the state. (Unemployment Insurance Code (UIC) Section
1088.5)
Existing law requires each contractor to file with the CSLB
proof of compliance with the requirement of maintaining
workers' compensation coverage, or, unless the contractor
is a roofing contractor, file a declaration certifying that
the contractor has no employees. (UIC Section 1088.5)
Existing law requires roofing contractors to additionally
file proof of maintain compliance with workers'
compensation coverage requirements even if the contractor
has no employees.
Existing law requires workers' compensation insurers that
insure roofing contractors to conduct an annual payroll
audit of the contractor. (UIC Section 1088.5)
This bill:
1. Authorizes the EDD to provide the specific new employee
information to the JESF on the Underground Economy, the
CSLB, and the SCIF.
2. Permits the EDD, the CSLB, and the SCIF to share the new
hire information for the purposes of auditing,
investigating, and prosecuting violations of tax and
cash-pay reporting laws.
CONTINUED
AB 1794
Page
3
3. Extends the sunset date, to January 1, 2019, of the
expanded contractor payroll audit provision.
4. Directs that the above requirements under the memorandum
of understanding regarding the administration and
enforcement of the reporting and payroll duties relating
to contractors are to be executed on or before July 1,
2013.
5. Adds language triple-jointing the overlapping provisions
of AB 1794 (Williams), AB 174 (Monning), and AB 1845
(Solorio). All three bills amend the same code section
- Unemployment Insurance Code Section 1088.5.
Comments
Existing law requires private employers to secure the
payment of workers compensation by obtaining and
maintaining workers' compensation insurance or to
self-insure as an individual employer or as one employer in
a group of employers. Contractors' license law requires
every licensed contractor to have on file at all times with
the CSLB a current and valid certificate of workers'
compensation insurance or certification of self-insurance,
or a statement certifying that he/she has no employees and
is not required to obtain or maintain workers compensation
insurance.
While existing law requires contractors to have workers
compensation insurance coverage for their as a condition of
obtaining and maintaining a license, a study by the CSLB
has revealed that approximately half of licensed
contractors either claim an exemption based on having no
employees or maintain a minimum policy under which no
employees are reported to their insurance carrier. When a
contractor under reports employees to obtain a workers'
compensation premium, this puts law abiding contractors who
do report their employees correctly at a disadvantage.
This results in a law abiding contractor to pay up to five
times more in workers' compensation insurance premiums.
This bill authorizes the EDD to provide the specific new
employee information to the JESF on the Underground
CONTINUED
AB 1794
Page
4
Economy, the CSLB, and the SCIF. This will allow efficient
sharing of information in order to ensure that employers
are paying adequate workers' compensation insurance for
their employees.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/24/12)
California State Council of Laborers (source)
California Association of Specialty Contractors
California Chapters of the National Electrical Contractors
Association
California Labor Federation
California Landscape Contractors Association
California Legislative Conference of Plumbing, Heating and
Piping Industry
California State Association of Electrical Workers
California State Pipe Trades Council
Construction Industry Legislative Council
Contractors State License Board
Union Roofing Contractors Association
Western States Council of Sheet Metal Workers
ARGUMENTS IN SUPPORT : According to the author's office,
this bill is intended to curb abuses by unscrupulous
contractors who intentionally under-report or fail to
report payroll, thereby defrauding workers' compensation
insurers, placing injured workers at risk, and gaining an
unfair competitive advantage over honest contractors. This
bill will expand the rules that already apply to roofing
contractors by applying the same standards to all
contractors.
According to the sponsor, California State Council of
Laborers, this bill addresses the problem with regard to
unscrupulous contractors who intentionally underreport
and/or fail to report employees as a means to curtail
paying adequate workers' compensation premiums. This
growing problem of "premium insurance fraud" has led to
workers' compensation premium rates skyrocketing through
the state, and has forced many law-abiding construction
employers to pay two to three times more in workers'
CONTINUED
AB 1794
Page
5
compensation premiums to cover "high risk" workers.
Proponents argue that this bill will also, create a more
competitive bid environment by requiring all contractors to
play by the same rules and incur the same costs when
bidding on a project. By requiring all contractors to
report new employees, this bill will also help capture a
portion of the billions of dollars lost in underreported
annual payroll taxes at a time the state needs it most.
ASSEMBLY FLOOR : 57-20, 5/30/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer,
Fong, Fuentes, Furutani, Galgiani, Gatto, Gordon, Hall,
Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman,
Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning,
Nestande, Olsen, Pan, Perea, V. Manuel Pérez, Portantino,
Skinner, Smyth, Solorio, Swanson, Torres, Wieckowski,
Williams, Yamada, John A. Pérez
NOES: Conway, Cook, Donnelly, Beth Gaines, Garrick, Grove,
Hagman, Halderman, Harkey, Jeffries, Jones, Knight,
Logue, Mansoor, Miller, Morrell, Nielsen, Norby, Silva,
Wagner
NO VOTE RECORDED: Fletcher, Gorell, Valadao
PQ:km 8/24/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED