BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de Le�n, Chair


          SB 390 (Wright) - Employee Wage Withholding: Failure to Remit
          
          Amended: As Introduced          Policy Vote: L&IR 5-0
          Urgency: No                     Mandate: Yes
          Hearing Date: May 6, 2013       Consultant: Robert Ingenito
          
          This bill does not meet the criteria for referral to the  
          Suspense File.


          Bill Summary: SB 390 would empower the Labor Commissioner to  
          pursue non-remitted payroll taxes from employers. 

          Fiscal Impact: The Department of Industrial Relations (DIR)  
          estimates that it would need two partial-year, ongoing positions  
          totaling $130,000 (special funds) to implement the provisions of  
          the bill. 

          Background: Current federal and state law both require employers  
          to withhold certain taxes from an employee's wages. These taxes  
          include personal income tax, state disability insurance, and  
          Federal Insurance Contribution Act (FICA) taxes, whose proceeds  
          fund Social Security and Medicare. The withheld taxes are then  
          remitted to the appropriate taxing authority. Current federal  
          and state law both provide for significant criminal and civil  
          penalties for employers who fail to comply, including felony  
          convictions, fines, and prison time.

          Nevertheless, some employers are withholding payroll and income  
          taxes from employees, but not remitting them as required by  
          current law. In these instances, the Internal Revenue Service  
          and the Franchise Tax Board hold the affected employees liable  
          for the entire amount of the tax owed (including the amount  
          withheld by the employer but not remitted to the taxing agency).  
           The Social Security Administration, conversely, does credit the  
          employee with the value of the unremitted withholding.

          Proposed Law: This bill would create a criminal provision in the  
          Labor Code, thereby allowing the Labor Commissioner to pursue a  
          criminal misdemeanor prosecution against employers who do not  
          remit payroll taxes. Specifically, this bill would:









          SB 390 (Wright)
          Page 1


                 Provide that it is illegal for an employer to willfully  
               or with the intent to defraud fail to remit withholding's  
               from an employee's wages pursuant to local, state or  
               federal law to the proper agency, and; 

                 Provide that if an employer fails to remit $500 or more  
               in wage withholdings, the employer's violation is a  
               misdemeanor and shall be punishable by imprisonment in a  
               county jail for a period of not more than one year, by a  
               fine of not more than one thousand dollars ($1,000), or  
               both.


          
          Related Legislation: AB 469 (Swanson), Statutes of 2011, Chapter  
          655, requires the provision of a notice at the time of hire that  
          lists the relevant details of a worker's employment.