BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 691|
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UNFINISHED BUSINESS
Bill No: SB 691
Author: Lieu (D)
Amended: 8/24/12
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMM. : 5-0, 1/11/12
AYES: Lieu, DeSaulnier, Leno, Padilla, Yee
NO VOTE RECORDED: Wyland, Runner
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 33-0, 1/23/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Corbett, Correa, De León, DeSaulnier, Dutton, Emmerson,
Fuller, Gaines, Harman, Hernandez, Huff, Kehoe, Leno,
Lieu, Liu, Lowenthal, Negrete McLeod, Padilla, Pavley,
Price, Rubio, Simitian, Steinberg, Strickland, Vargas,
Walters, Wolk, Wright
NO VOTE RECORDED: Cannella, Evans, Hancock, La Malfa,
Runner, Wyland, Yee
ASSEMBLY FLOOR : Not available
SUBJECT : Unemployment insurance: compensation
SOURCE : Author
DIGEST : This bill permits information sharing between
the Employment Development Department (EDD) and the
Contractors' State License Board (CSLB) to assist with its
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workers' compensation fraud investigations. Also, requires
the Director of EDD to provide the Agricultural Labor
Relations Board (ALRB) with information in EDD's possession
including employee, wage, and employer information for use
in the investigation or enforcement of the Agricultural
Labor Relations Act (ALRA).
Assembly Amendments (1) require the Director of EDD to
provide ALRB with specified information for use in the
investigation or enforcement of the
Alatorre-Zenovich-Dunlap-Berman Agricultural Labor
Relations Act of 1975, and (2) make various technical
changes.
ANALYSIS : Existing law establishes a workers'
compensation system that provides benefits to an employee
who suffers from an injury or illness that arises out of
and in the course of employment, irrespective of fault.
This system requires all employers to secure payment of
benefits by either securing the consent of the Department
of Industrial Relations (DIR) to self-insure or by securing
insurance against liability from an insurance company duly
authorized by the state.
Existing law vests EDD with the responsibility of ensuring
employers remit appropriate Unemployment Insurance (UI)
contributions and to collect the employee wage deductions
to the Disability Fund. EDD uses these funds to finance
the Unemployment Insurance and Disability Insurance (DI)
Programs.
Existing law also authorizes EDD to collect personal income
taxes required to be withheld by employers.
Existing law requires that EDD collect appropriate data in
order to carry out the responsibilities listed above. This
information includes the employer's name and address, the
number and contact information of employees employed by an
employer, the wages paid to those employees, and any
independent contractors that have performed services for an
employer.
Existing law requires that, unless specifically provided,
the information obtained in the administration of the UI
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Program and DI program are confidential and must be used
for the exclusive use and information of the Director of
EDD in discharge of his/her duties. Any person violating
the confidentiality of this information is guilty of a
misdemeanor.
Existing law specifically provides that EDD may share
information to the district attorney of any county, the
office of the Attorney General, the DIR, and the Department
of Insurance if that information is relevant to any
specific workers' compensation fraud investigation.
Information cannot be shared if doing so would violate
federal law or regulations.
This bill adds CSLB to the list of authorized governmental
entities that EDD may share information with for the
purposes of aiding any specific workers' compensation fraud
investigation.
Comments
The State of California faces significant challenges from
the underground economy, which is defined by the EDD as
individuals and businesses that deal in cash and/or use
other schemes to conceal their activities and their true
tax liability from government licensing, regulatory, and
taxing agencies. In short, it is an entire universe of
illegal activities that can include such diverse activities
as tax fraud, cigarette smuggling, and failure to provide
employees the minimum wage. A 2005 Legislative Analyst's
Office study on the underground economy estimated that
California loses $6.5 billion in annual income tax
revenues.
One of the most egregious activities by employers who
participate in the underground economy is workers'
compensation fraud. This can include failure by the
employer to report all of his or her employees to the
insurance company when creating a policy, misreporting the
type of work done by employees, or even failing to secure
any workers' compensation coverage for all employees.
In testimony before the Senate Select Committee on Small
Business and the Underground Economy in 2011, Professor
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Frank Neuhauser of the University of California, Berkeley
testified that, on average, $15 to $68 billion of annual
payroll in California went unreported, or 4-12 percent of
the total payroll in California. These figures did not
include wages or employees that were misreported into a
lower premium class. Particularly in high risk
occupations, this lack of reporting increased workers'
compensation premiums by more than 300 percent, pressuring
law-abiding employers to either go underground or go out of
business.
As the licensee of California's contractors, the CSLB has
frequent contact with occupations that are on the frontline
of the fight against the underground economy. Contractors
such as roofers and electricians face some of the highest
workers' compensation premiums due to injuries, but also
suffer from some of the most significant rate distortion
due to misreporting and underreporting. While the CSLB
must ensure that licensed contractors appropriately
maintain workers' compensation coverage, they do not
currently have statutorily guaranteed access to EDD's
databases to investigate possible workers' compensation
fraud.
This bill permits information sharing between EDD and CSLB
to assist with its workers' compensation fraud
investigations. Also, requires the Director of EDD to
provide ALRB with information in EDD's possession including
employee, wage, and employer information for use in the
investigation or enforcement of the ALRA.
Comments
According to the author's office, this bill seeks to assist
the CSLB in their investigation of worker's compensation
fraud by permitting the EDD to share employment data and
information with the CSLB for the purposes of investigating
any specific workers' compensation fraud investigation.
Currently, the ALRB has to negotiate a memorandum of
understanding to receive very limited types of data and is
restricted by a confidentiality clause from introducing it
into evidence in hearings. This creates unnecessary work
for ALRB's regional staff and causes significant delays in
enforcement. Similar departments already have lawful
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access to this information. For example, the Division of
Labor Standards Enforcement has access to otherwise
confidential information to seek criminal, civil, or
administrative remedies in connection with the failure to
pay, or the unlawful payment of, wages.
Prior Legislation
AB 878 (Berryhill), Chapter 686, Statutes of 2011, requires
workers' compensation insurers to notify the CSLB if a
licensee is found to have misled the insurer on his/her
workers' compensation coverage.
AB 2305 (Knight), Chapter 423, Statutes of 2010, requires
roofing contractors to maintain workers' compensation
coverage.
AB 2433 (Ruskin), Chapter 139, Statutes of 2010, authorizes
the Board of Equalization to access EDD data to assist in
the administration of tax programs.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 1/18/12) (Unable to reverify at time
of writing)
American Federation of State, County and Municipal
Employees
Contractors State License Board
Spa & Pool Industry Education Council
PQ:m 8/28/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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