BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          SB 459 (Corbett)
          
          Hearing Date: 5/9/2011          Amended: 3/23/2011
          Consultant: Bob Franzoia        Policy Vote: L&IR 5-2  Judiciary 
          3-1
          















































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          BILL SUMMARY: SB 459 would do the following:
          - Authorize the Labor and Workforce Development Agency to assess 
          civil penalties on employers found to be engaging in the willful 
          misclassification of an employee as an independent contractors 
          or the charging of an employee who have been willfully 
          misclassified a fee or making any deductions from compensation.
          - Require employers to provide to a person hired as an 
          independent contractor, when that person is hired, a form that 
          includes a notice that the person has been hired as an 
          independent contractor, a statement explaining the impact that 
          the person's status as an independent contractor has on tax 
          obligations and eligibility for labor and employment 
          protections, and a notice of the person's ability to seek advice 
          from the Employment Development Department (EDD) or the Labor 
          Commissioner as to whether the person is properly classified as 
          an independent contractor.  
          - Require the person employing labor in this state to maintain, 
          for a period of no less than two years, records of the 
          independent contractors hired by that person which include 
          specified information concerning each independent contractor, 
          and to make these records available for inspection.
          -Require EDD to develop a form that includes a notice to an 
          independent contractor regarding the impact that status as an 
          independent contractor has on the individual's tax obligations 
          and eligibility for labor and employment protections, and a 
          notice that the independent contractor may seek advice from EDD 
          or Labor Commissioner as to whether the person is properly 
          classified as an independent contractor.
          - Require EDD to process a request for advice by a person 
          regarding whether that person is an independent contractor or 
          employee, and to take all steps reasonably necessary to carry 
          out the duties described in these provisions.
          - Male other changes relating to liability, records inspection 
          and access.
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                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund
           Increased enforcement  $200-$1,000$400-$2,000 $400-$2,000  
          General
          costs

          EDD verification process          Minor, absorbable costs 








          SB 459 (Corbett)
          Page 3


          ongoing                Special*

          Inspection of records  Minor, absorbable costs ongoing  Special*

          * Labor Enforcement and Compliance Fund
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          STAFF COMMENTS: This bill meets the criteria for referral to the 
          Suspense File.
          
          The provisions of this bill would likely be enforced by the 
          Division of Labor Standard Enforcement within the Department of 
          Industrial Relations.  Staff is unaware of any data which would 
          assist in estimating the frequency of violations where there is 
          a willful misclassification or payment of employees.  EDD would 
          have enforcement responsibilities where there was nonpayment of 
          unemployment insurance taxes.  The Franchise Tax Board would 
          have enforcement responsibilities where there was nonpayment of 
          employment taxes.

          To provide the committee with some estimate of the fiscal impact 
          of adding Labor Code 226.8, preliminary information indicates 
          one deputy is able to investigate and hear approximately 25 
          cases involving labor standards violations.  If the division, 
          which has a backlog of approximately 1,000 cases, receives 100 
          to 500 additional complaints annually, the division would 
          require 4 to 20 new deputies to pace with the workload.  At an 
          average of $100,000 per personnel year for salary and benefits, 
          the bill would have a fiscal impact of $400,000 to $2,000,000 
          annually.  Staff notes however, that willful, generally an 
          intentional or voluntary violation of a known legal duty, is a 
          higher test and may make it more difficult to find a violation, 
          thereby constraining the number of enforcement actions.