BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 270| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 270 Author: Padilla (D) Amended: As introduced Vote: 21 SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 4-0, 4/10/13 AYES: Lieu, Wyland, Leno, Padilla NO VOTE RECORDED: Yee SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Underground economy: enforcement actions SOURCE : Author DIGEST : This bill directs agencies participating in the Joint Enforcement Strike Force (JESF) and the Labor Enforcement Task Force (LETF), to the degree feasible, coordinate their law enforcement activities and exchange information to better facilitate their law enforcement activities. ANALYSIS : Existing law establishes the JESF, administered by the Employment Development Department (EDD), to combat California's Underground Economy. The JESF is a coalition of California state government enforcement agencies that work together to combat the underground economy to ensure a level playing field for California businesses. The goals of the JESF are to: 1.Eliminate unfair business competition. CONTINUED SB 270 Page 2 2.Protect workers by ensuring that they receive all benefits to which they are entitled by law relating to wages and hours, health and safety, and income replacement. 3.Protect the consumer by ensuring that all businesses are properly licensed and that they adhere to the State's consumer protection regulations. 4.Reduce the burden on law-abiding citizens and businesses by ensuring that all businesses and individuals comply with the State's licensing, regulatory, and payroll tax laws. 5.Reduce the tax gap by increasing voluntary compliance with the State's payroll tax laws to maximize the State's General and Special Fund revenues. The existing LETF, under the administration of the Department of Industrial Relations since January 2012, was created to combat the underground economy in California to create an environment where legitimate businesses can thrive. The goals of the LETF are to: 1.Ensure workers receive proper payment of wages and are provided a safe work environment. 2.Ensure California receives all employment taxes, fees, and penalties due from employers. 3.Eliminate unfair business competition by leveling the playing field. 4.Make efficient use of state and federal resources in carrying out the mission of the LETF. The LETF coalition is a partnership that includes representatives from the Labor & Workforce Development Agency, Department of Industrial Relations, including Division of Labor Standards Enforcement and Division of Occupational Safety and Health (DOSH), EDD, Contractors State Licensing Board, California Department of Insurance, Board of Equalization, Bureau of Automotive Repair, State Attorney General and District Attorneys throughout California. In this joint effort, information and resources are shared to ensure hard-working, CONTINUED SB 270 Page 3 compliant business owners and their employees have an opportunity for healthy competition. This bill directs agencies participating in the JESF and the LETF, to the degree feasible, coordinate their law enforcement activities and exchange information to better facilitate their law enforcement activities. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 4/22/13) California Association for Health Services at Home California Rural Legal Assistance Foundation Spa & Pool Industry Education Council ARGUMENTS IN SUPPORT : Proponents argue that violations of labor and tax laws often go hand in hand. When an employer fails to pay a worker minimum wage or overtime pay or utilizes unreported cash payments, the state loses revenues from income and payroll taxes that fund the unemployment insurance system, paid family leave, disability insurance and state general fund programs. The author's office maintains that, unfortunately, state enforcement efforts in the underground economy are limited due to limited resources and a growing economy. According to the author's office, between 1970 and 2011, the labor force in California grew approximately 125%. However, staff positions at Division of Labor Standards Enforcement have only grown 45% since 1970. In order to pool limited resources to combat the underground economy, the Legislature created the Joint Enforcement Strike Force and the Department of Industrial Relations created the Labor Enforcement Task Force. Each entity is comprised of various state and federal agencies; however, both have some overlapping membership. The author's office contends there is no formal process for these two entities to coordinate efforts and share information. This bill directs the two task groups to coordinate efforts to combat the underground economy. CONTINUED SB 270 Page 4 Overall, proponents argue that employers operating in the underground economy hurt everyone and the increased coordination of efforts between enforcement agencies will help to reduce disparities between employers that do not adhere to the law and those that do. PQ:ej 4/22/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED