BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1177
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          Date of Hearing:  June 12, 2012
          Counsel:       Sandy Uribe


                         ASSEMBLY COMMITTEE ON PUBLIC SAFETY
                                 Tom Ammiano, Chair

                     SB 1177 (Leno) - As Amended:  April 19, 2012
                       As Proposed to be Amended in Committee
           
           
           SUMMARY  :  Provides that where an employer is convicted of a 
          crime against an employee, the restitution order shall not be 
          offset by workers' compensation payments unless the employer has 
          paid workers' compensation insurance premiums in accordance with 
          the law.  Specifically,  this bill  :  

          1)Provides that where an employer is convicted of a crime 
            against an employee, the restitution order shall not be offset 
            by workers' compensation insurance payments unless the court 
            finds substantial evidence that all insurance premiums have 
            been made in full accordance with the law.

          2)Makes technical, non-substantive changes.

           EXISTING LAW  : 

          1)States it is the unequivocal intention of the People of the 
            State of California that all persons who suffer losses as a 
            result of criminal activity shall have the right to 
            restitution from the persons convicted of the crimes for 
            losses they suffer.  Restitution shall be ordered from the 
            convicted persons in every case, regardless of the sentence or 
            disposition imposed, in which a crime victim suffers a loss, 
            unless compelling and extraordinary reasons exist to the 
            contrary. ÝCal. Const., Art. I, sec. 28(b).]

          2)Declares legislative intent that a crime victim who incurs an 
            economic loss as a result of the commission of a crime shall 
            receive restitution directly from the convicted defendant.  
            ÝPenal Code Section 1202.4(a)(1).]

          3)Requires full victim restitution for economic losses 
            determined by the court.  ÝPenal Code Section 1202.4(f).]









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          4)States that economic losses include, but are not limited to, 
            the following:  full or partial payment for the value of 
            stolen or damaged property; medical expenses; mental health 
            counseling expenses; wages or profits lost due to injury 
            incurred by the victim, and if the victim is a minor, wages or 
            profits lost by the minor's parent, parents, guardian, or 
            guardians, while caring for the injured minor; wages or 
            profits lost by the victim, and if the victim is a minor, 
            wages or profits lost by the minor's parent, parents, 
            guardian, or guardians, due to time spent as a witness or in 
            assisting the police or prosecution; noneconomic losses, 
            including, but not limited to, psychological harm, for felony 
            violations of Penal Code Section 288; interest at the rate of 
            10% per annum; actual and reasonable attorney's fees and other 
            collection costs; relocation expenses incurred by an adult 
            victim; expenses to install or increase residential security; 
            expenses to retrofit a residence or vehicle, or both, to make 
            the residence accessible to or the vehicle operational by the 
            victim, where the victim suffers permanent disability as a 
            direct result of the crime; and expenses to monitor and repair 
            the  credit report of a victim of identity theft.  ÝPenal Code 
            Section 1202.4(f).]

          5)Defines a "victim" for purposes of restitution, as including 
            any of the following: 

             a)   The immediate surviving family of the actual victim; 

             b)   Any corporation, business trust, estate, trust, 
               partnership, association, joint venture, government, 
               governmental subdivision, agency, or instrumentality, or 
               any other legal or commercial entity when that entity is a 
               direct victim of a crime; and 

             c)   Any person who has sustained economic loss as the result 
               of a crime and who satisfies any of the following 
               conditions:

               i)     At the time of the crime was the parent, 
                 grandparent, sibling, spouse, child, or grandchild of the 
                 victim;

               ii)    At the time of the crime was living in the household 
                 of the victim;









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               iii)   At the time of the crime was a person who had 
                 previously lived in the household of the victim for a 
                 period of not less than two years in a relationship 
                 substantially similar to a relationship listed above;

               iv)    Is another family member of the victim, including, 
                 but not limited to, the victim's fiancé or fiancée, and 
                 who witnessed the crime; or 

               v)     Is the primary caretaker of a minor victim.  ÝPenal 
                 Code Section 1202.4(k).]

          6)Provides that a criminal restitution order shall be 
            enforceable as though it were a civil judgment.  ÝPenal Code 
            Sections 1202.4(a)(3)(B) and (i).]

          7)States that the determination of the amount of restitution 
            ordered shall not be affected by the indemnification or 
            subrogation rights of any third party.  ÝPenal Code Section 
            1202.4(f)(2).]

          8)Vests authority in the Legislature to create and enforce a 
            system for workers compensation making adequate provisions for 
            the comfort, health, safety, and general welfare of any and 
            all workers and those dependent upon them for support to the 
            extent of relieving from the consequences of any injury or 
            death incurred or sustained by workers in the course of their 
            employment, irrespective of the fault of any party.  
            (California Constitution, article XIV, section 4.)

          9)Provides that in the event of a compensable industrial injury, 
            workers' compensation is the sole and exclusive remedy of the 
            employee or his or her dependents against the employer, and 
            that the employee or the employee's dependents cannot bring a 
            civil action for damages against the employer, except under 
            specified circumstances.  (Labor Code Section 3602.)

          10)Provides that an employer is liable for a death benefit to 
            the dependents of an employee who dies as a result of a 
            work-related injury, and that, except in certain situations, 
            the death benefit is a dependent's exclusive remedy against 
            the employer for the employee's work-related death.  ÝLabor 
            Code Sections 3600, 3602, and 4701(b).]

          11)Specifies exceptions to the general rule that workers 








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            compensation is the exclusive remedy for an industrial injury, 
            including:

             a)   Where the employee's injury or death is proximately 
               caused by a willful physical assault by the employer (Labor 
               Code Section 3602); 

             b)   Where the employee's injury is aggravated by the 
               employer's fraudulent concealment of the existence of the 
               injury and its connection with the employment (Labor Code 
               Section 3602); 
              
             c)   Where the employer fails to secure workers' compensation 
               coverage for his or her employees (Labor Code Section 
               3706); and

             d)   Where the employee's injury or death is proximately 
               caused by the employer's knowing removal of, or knowing 
               failure to install, a point of operation guard on a power 
               press.  (Labor Code Section 4558.)

          12)Provides that when an injury causes death the employer shall 
            be liable for all of the following:

             a)   Reasonable expenses of the employee's burial, as 
               specified.

             b)   A death benefit, to be allowed to the dependents when 
               the employee leaves any person dependent upon him or her 
               for support, as specified.  (Labor Code Sections 4701 and 
               4702.

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           1)Author's Statement  :  According to the author, "SB 1177 will 
            enable more victims and victims' families - in the event of a 
            serious workplace injury or death where the employer is 
            criminally responsible - to receive full restitution from the 
            convicted employer.

            Under California law, an employer may be charged criminally 
            when an employee is killed or seriously injured on the job. 
            Upon conviction, the employer will be ordered to pay 








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            restitution to the victim or victim's family, which can 
            include medical expenses and lost future wages.

            If the victim or victim's family receives workers' 
            compensation benefits from the employer's insurer, the 
            employer will typically seek to reduce its restitution 
            obligation to the victim or victim's family by arguing that 
            the employer is entitled to an 'offset' for those benefits - 
            that is, the employer will assert that restitution owed should 
            be reduced (offset) by the amount of any workers' compensation 
            insurance payments made to the victim or family.

            However, in some cases, the convicted employer has also been 
            defrauding its workers' compensation insurance carrier by, for 
            example, underreporting or failing to report the employee's 
            wages.  Despite this, the employer may still claim a workers' 
            compensation offset to the restitution ordered by the court.

            Employers who are following the law are at a competitive 
            disadvantage when less scrupulous employers cut corners for 
            their employee's workplace safety and workers compensation 
            coverage.  In addition, criminally negligent employers are 
            getting the extra benefit of restitution offsets when they 
            have defrauded their workers' compensation insurer.

            SB 1177 is necessary to clearly state in statute that an 
            offset is prohibited unless the employer can prove that as of 
            the date of the workplace injury or death all policy premiums 
            actually owed were paid. Without offering such evidence to the 
            court, the employer will be required to pay full restitution 
            to the victim or victim's family without any offset for 
            workers' compensation insurance payments."

           2)Effect of Insurance on Restitution Orders  :  The fact that a 
            victim has insurance to cover the loss caused by a criminal 
            defendant's conduct is irrelevant with respect to the 
            defendant's duty to make restitution to the victim.  Payments 
            received by a crime victim from his or her insurance company 
            or from an independent third party for economic losses 
            suffered as a result of the defendant's criminal conduct 
            cannot reduce the amount of restitution the defendant owes.  
            ÝIn re Brittany L. (2002) 99 Cal.App.4th 1381, 1389.]  A crime 
            victim is entitled to restitution regardless of whether the 
            victim has submitted an insurance claim or has been partially 
            or fully reimbursed by his or her insurer.  ÝPeople v Birkett 








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            (1999) 21 Cal.4th 226, 245-247.]  

          On the other hand, "when the victim has obtained a settlement 
            payment from a company that insured the defendant for civil 
            liability, the amount of the restitution order in a criminal 
            action must be offset by money paid to the victim by the 
            insurance company." ÝPeople v. Short (2008) 160 Cal.App.4th 
            899, 903; People v. Bernal (2002) 101 Cal.App.4th 155, 
            165-168.]  The relationship between the defendant and the 
            insurance company is such that the victim is deemed to have 
            received the civil settlement payment "directly from the 
            defendant" within the meaning of Penal Code Section 
            1202.4(a)(1).  (People v. Short, supra, 160 Cal.App.4th at p. 
            903.)  

            An offset is permitted, however, only to the extent that the 
            civil settlement and the restitution order constitute 
            compensation for the same items of loss.  ÝPeople v. Jennings 
            (2005) 128 Cal.App.4th 42, 58; see also People v. Bernal, 
            supra, 101 Cal.App.4th at p. 168 (defendant entitled to offset 
            for payments "to the extent that those payments are for items 
            of loss included in the restitution order").]

           3)People v. Shim, Kim and California C&R, Inc  :  The case that 
            prompted introduction of this bill is People v. Shim, Kim and 
            California C&R, Inc, San Francisco Court Nos. 10011927, 
            2451742, & 10011910.  According to the prosecution brief 
            presented to this Committee, Antonio Martinez, an employee of 
            California C&R, a roofing company owned by defendant Shim, 
            fell off a four-story apartment building and died.  On the day 
            of Martinez's death, the roofers were not wearing protective 
            gear, there were no railings, scaffolds, or other protective 
            barriers, and there was no supervision of work along the 
            roof's edge.  These circumstances violated Cal/OSHA 
            regulations.  Because the working conditions contributed to 
            Martinez's death, defendant Shim pled guilty to involuntary 
            manslaughter and to willful violation of Cal/OSHA regulations 
            resulting in death. 

          Additionally, because Mr. Martinez was an undocumented worker, 
            defendant Shim and his company had failed to report Martinez's 
            employment to the Employment Development Department (EDD) or 
            the State Compensation Insurance Fund (SCIF), and paid him in 
            cash.  Defendant Shim also pled guilty to worker's 
            compensation premium fraud and tax fraud.








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            At the 2011 restitution hearing in this case, defendant Shim 
            and California C&R Inc. stipulated to restitution to EDD in an 
            approximate amount of $3,000 and to SCIF in an approximate 
            amount of $108,000, the amount of unpaid premiums.  As to the 
            decedent, SCIF had paid the Martinez family $320,000 in the 
            worker's compensation proceedings because workers' 
            compensation insurance was obtained by the roofing company and 
            premiums were paid to cover the employees. The insurance 
            carrier determined that under the terms of the policy all 
            employees were covered and that included Mr. Martinez.  
            Defendant Shim sought an offset of victim restitution to the 
            Martinez family.  The prosecution argued that since defendant 
            had not paid premiums for Martinez specifically, the benefit 
            paid to his family was not paid on defendant's behalf and 
            there should be no offset.

            The trial court ruled in favor of the defense, finding that 
            defendant Shim was entitled to an offset because he had paid 
            premiums and the victim had been made whole.  The court noted 
            that to disallow the offset would doubly compensate the 
            victim's family.  The court noted it would not be in the 
            interests of judicially economy to double compensate the 
            victim and then have the workers' compensation insurance 
            company sue the victim to get that money back.  The court 
            noted that as to the fraud between the defendant and the 
            insurance carrier, that restitution claim had been settled.  

           4)Prematurity of this Bill  :  The case which prompted this bill 
            is currently pending in the First District Court of Appeal.  
            (People v. Shim et al., Appeal No. A134563.)  The docket shows 
            the Appellant's Opening Brief was due on June 4, 2012, but it 
            has not yet been filed.  
            (.)  Given that there is no Court 
            of Appeal opinion, the trial court's order is not binding 
            authority on any other court.  In light of this, a legislative 
            "fix" to this perceived problem seems premature.  It may set 
            bad precedent for the Legislature to pass legislation on trial 
            court orders that have not been subjected to the appellate 
            process and which are not final judgments.  This bill raises 
            the possibility that parties to lawsuits who do not like the 
            result appeal to the Legislature rather than to the courts.
           








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          5)Issue of Double Payment to the Victim  :  Victim restitution is 
            a constitutional guarantee.  ÝCal. Const., Art. I, sec. 
            28(b).]  The Supreme Court has held that victim restitution 
            should "restore the economic status quo."  ÝPeople v. Giordano 
            (2007) 42 Cal.4th 644, 658.]  But "a restitution order is not 
            intended to provide the victim with a windfall."  ÝPeople v. 
            Millard (2009) 175 Cal.App.4th 7, 28; People v. Chappelone 
            (2010) 183 Cal.App.4th 1159, 1172.]

          This bill presumes that the defendant's worker's compensation 
            insurance carrier has made a payment to the victim of the 
            crime ("a payment to the employee or the employee's dependent 
            that is paid by the employer's workers' compensation insurance 
            carrier . . . . ").  This bill then prohibits offset for 
            victim restitution by the defendant if the court finds 
            substantial evidence that the insurance premiums have not been 
            paid in full in accordance with the law.  In such a case, the 
            defendant must pay full victim restitution, regardless of any 
            amount paid by his or her insurance.  Therefore, this bill 
            raises the issue of the possibility of overcompensation to the 
            victim.  
           
             However, the workers' compensation system is a separate 
            constitutional guarantee.  (California Constitution, article 
            XIV, section 4.)  Liability for injury is based not on any act 
            or omission of the employer but rather on the existence of the 
            employer/employee relationship.  ÝBell v. Industrial Vangas, 
            Inc. (1981) 30 Cal.3d 268, 277.]  Workers' compensation laws 
            provide for a variety of benefits to injured employees, 
            although the benefits are limited in comparison to civil 
            damages.  Benefits include compensation for temporary 
            disability (Labor Code Sections 4650, 4650.5, 4652, and 4653), 
            permanent disability (Labor Code Sections 4061, 4062, 4650, 
            and 4658 to 4660), and medical care (Labor Code Sections 4600 
            to 4614.1).  In the case of a death, the employer is liable 
            for burial expenses and a death benefit is also provided.  
            (Labor Code Section 4701.)  The amount and duration of the 
            allowable death benefit is calculated based on the number of 
            total and partial dependents, whether or not they are minor 
            children.  (Labor Code Sections 4702, 4703, and 4703.5.)   

            Therefore, it appears there are other economic losses 
            contemplated by the restitution statute that are not 
            compensated under workers' compensation, such as additional 
            future lost wages above and beyond those specified in the 








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            Labor Code or expenses to retrofit a residence or vehicle 
            where the victim suffers permanent disability as a direct 
            result of the crime.  ÝSee Penal Code Section 1202.4(f).]  
            Thus, because these losses are not considered in workers' 
            compensation benefits, any restitution for these losses would 
            not be a windfall for the victim.  
             
           6)Argument in Support  :  According to the  California Labor 
            Federation  , "Under current law, an employer may face criminal 
            charges following a workplace injury or fatality, and if 
            convicted, the employer will often be ordered to pay 
            restitution to the victim or victim's family.

          "In some cases, an employer convicted in a workplace death has 
            also been defrauding his or her worker's compensation 
            insurance carrier by underreporting or failing to report the 
            employee's wages.  Incredibly, the employer will likely assert 
            that restitution owed should be reduced by the amount of any 
            worker's compensation insurance payments made to the victim or 
            family.

          "SB 1177 will prevent a defendant from benefiting from payments 
            made by an insurance company that the defendant himself has 
            defrauded.  We can think of no reason to allow employers 
            engaged in worker's compensation fraud to avoid paying full 
            restitution to injured or killed workers."

           7)Related Legislation :  AB 2346 (Butler) provides that if a 
            corporation or person is convicted of the involuntary 
            manslaughter of an agricultural worker due to failure to 
            provide adequate shade or water, the court's restitution order 
            shall require the defendant to make restitution to the 
            immediate surviving family of the deceased, to be shared 
            equally, in an amount up to $1 million in compensation for 
            lost future earnings.  SB 2346 is pending referral by the 
            Senate Rules Committee.

           REGISTERED SUPPORT / OPPOSITION  :   

          Support 
           
          San Francisco District Attorney's Office (Sponsor)
          California District Attorneys Association
          California Labor Federation
          Glendale City Employees Association








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          Los Angeles County District Attorney's Office
          Organization of SMUD Employees
          San Bernardino Public Employees Association
          San Luis Obispo County Employees Association
          Santa Rosa City Employees Association

           Opposition 
           
          None
           

          Analysis Prepared by  :    Sandy Uribe / PUB. S. / (916) 319-3744