BILL ANALYSIS �
SB 390
Page 1
Date of Hearing: July 3, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 390 (Wright) - As Amended: June 25, 2013
Policy Committee: Labor and
Employment Vote: 7-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill enables the Labor Commission (LC) to enforce a
violation 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 state and federal law, as
specified.
Requires any withholdings recovered from an employer in a
criminal proceeding to be forwarded to the appropriate fund or
plan, and requires the court to direct any restitution to the
agency, entity, or person, as specified.
FISCAL EFFECT
On-going special fund costs, between $150,000 and $250,000, to
the Department of Industrial Relations to enforce this measure.
COMMENTS
1)Rationale . Current federal and state law requires 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 provide for significant criminal and
civil penalties for employers who fail to comply, including
felony convictions, fines, and prison time.
According to the author, "Although California law requires
SB 390
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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.
"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 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."
2)Existing state law specifies it is unlawful for an employer to
willfully or with intent to defraud to fail to make payments
to a health or welfare fund, pension fund, or vacation plan,
as specified. Statute further makes it a misdemeanor when the
amount an employer fails to pay into this fund exceeds $500.
This bill would add the failure to remit employee's
withholdings to these statutory provisions.
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081