BILL ANALYSIS �
SB 390
Page 1
Date of Hearing: June 12, 2013
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hern�ndez, Chair
SB 390 (Wright) - As Introduced: February 20, 2013
SENATE VOTE : 27-6
SUBJECT : Employee wage withholdings: failure to remit.
SUMMARY : Makes it a crime under the Labor Code for an
employer who willfully or with intent to defraud, fails to remit
to the proper agency any withholdings made from a worker's wages
pursuant to local, state or federal law.
EXISTING FEDERAL LAW :
1)Provides that any person who willfully fails to collect or
truthfully account for and pay over taxes shall, in addition
to other penalties provided by law, be guilty of a felony and,
upon conviction thereof, shall be fined not more than $10,000,
or imprisoned not more than five years, or both, together with
the costs of prosecution.
2)Provides that any person who willfully fails to collect such
tax, or truthfully account for and pay over such tax, or
willfully attempts in any manner to evade or defeat any such
tax or the payment thereof, shall, in addition to other
penalties provided by law, be liable to a penalty equal to the
total amount of the tax evaded, or not collected, or not
accounted for and paid over.
EXISTING STATE LAW :
1)Provides that it is illegal for an employer to willfully or
with the intent to defraud fail to remit payments to a health
or welfare fund, pension fund or vacation plan, or other
similar plan for the benefit of the employees.
2)Provides that if an employer fails to remit $500 or more in
payments to an above-described fund, the employer's violation
is a misdemeanor and shall be punishable by imprisonment for a
period of not more than one year, by a fine of not more than
$1,000, or both.
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3)Provides that it is a violation of the law for any employer or
employing unit to willfully fail or refuse to make any
contributions which are due under the Unemployment Insurance
(UI) or Disability Insurance programs.
4)Provides that, after an employer has been appropriately
notified, any employer or person failing to withhold the
personal income tax (PIT) amount due from any taxpayer and who
fails to transmit the same to the appropriate department is
liable for such amounts.
5)Requires any employer or person required to withhold and
transmit shall comply with the requirement without resort to
any legal or equitable action in a court of law or equity.
6)Provides that any person or employer who, with or without
intent to evade, fails to withhold or fails to remit any
personal income tax withheld, is guilty of a misdemeanor and,
upon conviction, shall be fined an amount not to exceed
$1,000, or imprisoned for not more than one year, or both the
fine and imprisonment, at the discretion of the court.
FISCAL EFFECT : According to the Senate Appropriations
Committee analysis 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
this bill.
COMMENTS : The author states, "Unscrupulous employers operating
in the underground economy, and particularly labor contractors,
have been implicated in a whole host of illegal wage-related
practices in many industries in the last several decades.
Although California law requires employers to disclose all
deductions made from pay on their workers' itemized wage
statements, workers often do not learn that their employers has
pocketed their tax contributions for Social Security or Medicare
until they have some reason to contact those agencies. Then,
unfortunately, their remedies are quite limited.
Finally, the author argues, employers generally are required to
withhold applicable local, state and federal taxes from their
employees' paychecks and are also required to remit withholding
amounts to the proper agency. There are varying state and
federal civil and criminal penalties for violations of these
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differing requirements, but we are unaware of any specific
California law which targets underground economy actors with
criminal penalties for pocketing the Social Security or Medicare
taxes they withhold from their employees' paychecks."
Failure to Remit Taxes and Criminal Penalties : Both federal and
California law require certain taxes to be withheld from an
employee's wages. These include state disability insurance,
PIT, and Federal Insurance Contribution Act (FICA) taxes, which
fund Social Security and Medicare. These taxes are then
remitted to the appropriate authority, which then deposits those
funds into the appropriate trust fund. It is these payroll
taxes and wage remittances that allow these programs to
function.
Noting the importance of these programs to workers, both
California law and federal law provide significant criminal
penalties, including both jail and civil penalties.
Related Legislation :
AB 469 (Swanson) Chapter 655, Statutes of 2011, also known as
the Wage Theft Prevention Act of 2011, made a number of changes
related to "theft" of wages, employee wage claims and related
provisions.
ARGUMENTS IN SUPPORT :
According to the sponsor of this bill, the California Rural
Legal Assistance Foundation (CRLAF) and other low wage worker
advocates have always had cases where a particularly
unscrupulous employer's wage theft conduct extends beyond just
stealing wages but also extends to pocketing taxes or worker
contributions instead of remitting them to the appropriate
agency.
With the exception of farm workers employed by a farm labor
contractor, (FLC), who can seek to have the FLC's license
suspended or revoked if he fails to pay required taxes into the
UI benefit system, there has never been a remedy in the Labor
Code for this broader kind of criminal conduct.
Low-wage worker advocates are now seeing what seems to be an
uptick in these kinds of cases, and existing civil and criminal
remedies under state or federal tax laws seem to us to be
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inadequate. CRLAF argues that bringing the Labor Commissioner's
office into these types of egregious misconduct, this bill has
the potential to expand workers' protections.
REGISTERED SUPPORT / OPPOSITION :
Support
California Employment Lawyers Association
California Rural Legal Assistance Foundation (sponsor)
Construction Employers' Association
United Farm Workers
Opposition
None on file.
Analysis Prepared by : Lorie Alvarez / L. & E. / (916)
319-2091