BILL ANALYSIS Ó
SB 560
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Date of Hearing: June 23, 2015
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Susan Bonilla, Chair
SB 560(Monning) - As Amended April 6, 2015
SENATE VOTE: 35-0
NOTE: This bill is double-referred to the Assembly Committee on
Insurance.
SUBJECT: Contractors.
SUMMARY: Requires the enforcement division of the Contractors'
State License Board (CSLB) to enforce an employer's obligation
to secure the payment of workers' compensation under the Labor
Code.
EXISTING LAW:
1)Establishes the Division of Labor Standards Enforcement
(DLSE), also known as the Labor Commissioner's Office, within
the Department of Industrial Relations, which is required to
enforce the state's labor laws. (Labor Code (LAB) §§ 79-107)
2)Requires an employer to carry workers' compensation insurance.
(LAB §§ 3700-3709.5)
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3)Establishes an enforcement division, within the CSLB, which is
required to enforce the prohibition against unlicensed
contracting activity. (Business and Professions Code (BPC) §
7011.4(a))
4)Authorizes the CSLB's enforcement representatives to issue a
written notice to appear in court for a misdemeanor violation
under Penal Code § 853.6. (BPC § 7011.4(b))
5)Grants investigators for the Special Investigations Unit
within the CSLB the authority of peace officers to investigate
or prosecute a violation of the laws administered by the CSLB.
(BPC § 7011.5)
THIS BILL:
6)Requires the enforcement division within the CSLB to enforce
an employer's obligation to secure the payment of valid and
current worker's compensation insurance in accordance with
existing Labor Code provisions.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS:
Purpose. This bill is sponsored by the CSLB . According to the
author, "[This bill] would expand the jurisdiction of CSLB's
Enforcement Division to include ensuring payment for adequate
workers' compensation. Including workers' compensation
violations in the Notice To Appear will streamline the referral
of these cases to local district attorneys and place an emphasis
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on the importance of obtaining workers' compensation."
Background. The CSLB's enforcement division, the Statewide
Investigative Fraud Team (SWIFT), enforces the prohibition
against unlicensed contracting activity. According to the
CSLB's 2014 Sunset Review Report, the enforcement division
consists of enforcement representatives, peace officers, and
enforcement supervisors. When the CSLB suspects serious or
repeat violations for unlicensed activity, it will assign the
case to one of its enforcement representatives or peace officers
for formal investigation. The cases are subject to review by
enforcement supervisors.
In addition, the CSLB uses SWIFT to conduct stings and sweep
construction sites. The CSLB also uses SWIFT to conduct joint
operations and sweeps with other state agencies to raise the
penalties for violations by tacking on additional violations,
such as the failure to carry workers' compensation insurance.
If an investigation uncovers evidence of a possible violation of
unlicensed activity, the CSLB may issue a warning letter, issue
a citation, or refer the case to the District Attorney for
criminal prosecution (issue a notice to appear). However, the
CSLB's enacting statute only permits the CSLB, when acting
alone, to take action for violations specific to the licensure
of contractors, which does not include the general obligation to
carry workers' compensation insurance under the Labor Code.
For instance, the CSLB can require a contractor to carry
workers' compensation insurance as a condition of licensure. If
the CSLB finds that an unlicensed contractor is not carrying
workers compensation, it may issue the contractor an
administrative citation, which the contractor would have to pay
if the contractor eventually wishes to apply for a license.
Because of the limitation, the CSLB wishes to expand its
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jurisdiction to additionally cite for the failure to carry
workers' compensation insurance under the Labor Code.
Enforcement of Workers' Compensation Insurance Laws. In
California, the DLSE, also known as the Labor Commissioner's
Office, enforces state workers' compensation insurance laws.
When the DLSE suspects that an employer does not carry workers'
compensation, it will issue a stop order. The order prohibits
the employer from using employee labor until the employer
obtains coverage.
A violation of the order is a misdemeanor-punishable by
imprisonment in the county jail for up to 60 days, a fine of up
to $10,000, or both. The DLSE assesses a penalty of $1,000 per
employee on the payroll at the time the stop order is issued and
served, up to $100,000 (LAB § 3722(a)). The DLSE may also
elevate the citation to a misdemeanor notice to appear in
egregious cases.
Prior Related Legislation. AB 2554 (Berryhill), Chapter 85,
Statutes of 2012, provided CSLB enforcement representatives the
authority to issue a notice to appear for violations of
contracting laws.
SB 691 (Lieu), Chapter 832, Statutes of 2012, added CSLB to the
list of agencies approved to receive workers' compensation
insurance information from EDD.
ARGUMENTS IN SUPPORT:
The CSLB writes in support, "Under existing law, CSLB
[enforcement representatives] can issue a written [notice to
appear] to individuals who are caught contracting without a
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license. This occurs during CSLB's undercover sting operations
which are set up to target unlicensed contractors. Oftentimes,
these unlicensed contractors show up to a sting site with an
employee. In those cases, the unlicensed contractor generally
does not carry [workers' compensation] insurance. This bill
would allow CSLB to additionally cite for that violation, so
that it becomes part of the case that is forwarded to the local
district attorney for prosecution.
Failure to adequately insure employees against work-related
injuries is a significant component of the underground economy.
This bill provides CSLB an additional tool to help address this
problem."
ARGUMENTS IN OPPOSITION:
None on file.
REGISTERED SUPPORT:
Contractors State License Board (sponsor)
Construction Employers' Association
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
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REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Vincent Chee / B. & P. / (916) 319-3301