BILL ANALYSIS
AB 2770
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Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2770 (Monning) - As Amended: April 13, 2010
Policy Committee: Labor and
Employment Vote: 6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires that employers violating statutes relating to
employee wages, hours, and working standards be subject to an
audit or investigation by appropriate state tax authorities.
Specifically, the bill requires:
1)The Labor and Workforce Development Agency (LWDA), in
consultation with the Franchise Tax Board (FTB) and the
Economic and Employment Enforcement Coalition (EEEC), to
develop and implement a set of standards by July 1, 2011, that
if met by an employer, would trigger a recommendation of a tax
audit or investigation.
2)Effective July 1, 2011, the Labor Commissioner to refer any
employer that meets the standards to the appropriate tax
collection agency for audit or investigation. The Labor
Commissioner would also be required to provide to the tax
agencies all relevant and necessary information regarding the
violations.
FISCAL EFFECT
1)Significant costs to the Division of Labor Standards
Enforcement (DLSE) totaling $590,000 in 2011-12 and $440,000
in 2012-13 (special funds) related to (a) adding the referral
standards to its investigation protocols, (b) including
referrals in investigation reports, (c) tracking referrals,
and (d) training its investigators. These estimates assume
that about one-half of its 9,000 inspections result in
referrals.
AB 2770
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2)Minor one-time costs to LWDA and to develop and implement
referral standards.
3)Potential revenue gain, to the extent coordination between
state labor enforcement and tax collection agencies produces
high-value audit leads.
COMMENTS
1)Rationale . The bill is intended to improve coordination
between state agencies regarding enforcement of labor and tax
laws, and maximize state revenues by collecting funds
otherwise lost to the underground economy. The author asserts
that violations of labor and tax laws often go hand in hand.
For example, when an employer fails to pay minimum wages,
ignores overtime pay requirements, and/or pays cash under the
table, the state loses revenues from income and payroll taxes.
Thus, by subjecting labor violators to tax audits, the bill
will leverage limited state labor enforcement resources.
2)Background . LWDA is the agency in California responsible for
enforcement of labor laws and regulations, job training, and
various other workforce related activities. Within the agency
are several key state departments, boards, and panels,
including the Employment Development Department (EDD),
Department of Industrial Relations (DIR), and the Employment
Training Panel. The labor commissioner is the chief of DLSE,
which is a division within the Department of Industrial
Relations that is responsible for enforcing labor laws.
The EEEC consists of investigators from the divisions within
DIR, EDD, the Contractor's State License Board, and the U.S.
Department of Labor. The purpose of the EEEC is to educate
business owners and employees on federal and state labor,
employment, and licensing laws; and to conduct targeted
enforcement against labor law violators.
This bill requires the Labor and Workforce Development Agency
(Agency) in consultation with the Franchise Tax Board (FTB)
and the Economic and Employment Enforcement Coalition (EEEC)
to develop and implement a set of standards that, if met by an
employer, would trigger a recommendation for a tax audit or
investigation of employers violating state laws regarding
wages, hours and working conditions.
AB 2770
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3)Previous legislation . This bill is identical to AB 2879 (Leno)
from 2008, which was held in the Senate Committee on
Appropriations.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081