BILL ANALYSIS Ó
SB 390
Page 1
SENATE THIRD READING
SB 390 (Wright)
As Amended June 25, 2013
Majority vote
SENATE VOTE :27-6
LABOR & EMPLOYMENT 7-0 APPROPRIATIONS 17-0
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|Ayes:|Roger Hernández, Morrell, |Ayes:|Gatto, Harkey, Bigelow, |
| |Alejo, Chau, Gomez, | |Bocanegra, Bradford, Ian |
| |Gorell, Holden | |Calderon, Campos, |
| | | |Donnelly, Eggman, Gomez, |
| | | |Hall, Holden, Linder, |
| | | |Pan, Quirk, Wagner, Weber |
| | | | |
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SUMMARY : 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 : According to the Assembly Appropriations
Committee on-going special fund costs, likely less than $50,000,
to the Department of Industrial Relations to enforce this
measure.
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,
SB 390
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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
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,
Personal Income Tax (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.
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/she fails to pay required taxes into
the Unemployment Insurance (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
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remedies under state or federal tax laws seems to be inadequate.
CRLAF argues that by bringing the Labor Commissioner's office
into this type of egregious misconduct, this bill has the
potential to expand workers' protections.
Analysis Prepared by : Lorie Alvarez / L. & E. / (916)
319-2091
FN: 0002138