BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 313|
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THIRD READING
Bill No: SB 313
Author: DeSaulnier (D)
Amended: 4/27/09
Vote: 21
SENATE LAB. & INDUS. RELAT. COMMITTEE : 6-0, 4/29/09
AYES: DeSaulnier, Wyland, Ducheny, Hollingsworth, Leno, Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Workers compensation: penalty assessments
SOURCE : Small Business California
DIGEST : This bill increases the per-employee penalty for
the lack of workers' compensation coverage from $1000 to
$1500. This bill provides the Director of the Department
of Industrial Relations with the option to issue a penalty
assessment order, as specified. This bill also establishes
the period for the prorating of back premiums at three
years and provides for associated penalty assessments, as
specified.
ANALYSIS :
Existing law:
1. Requires every employer, except the state, to secure the
payment of workers' compensation for employees for
injuries arising out of, or in the course of,
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employment.
2. Specifies that the director of the Department of
Industrial Relation shall issue and serve a penalty
assessment order of $1000 per employee on an employer
who is found to be without workers' compensation
insurance and on whom a stop-work order has been imposed
due to the lack of such coverage. The collected monies
are deposited in the Uninsured Employers Benefit Trust
Fund (Fund). The monies in the Fund are collected
through a basic charge on all employers, supplemented by
the fines and penalties.
3. Provides that at any time that the director determines
that an employer has been uninsured for a period in
excess of one week during the calendar year preceding
the director's determination, the director may issue and
serve a penalty assessment order that requires the
uninsured employer to pay to the director, for deposit
into the State Treasury to the credit of the Uninsured
Employers Fund, the greater of: (a) twice the amount the
employer would have paid in workers' compensation
premiums during the period the employer was uninsured or
(b) the sum of one thousand dollars per employee
employed during the period the employer was uninsured.
This penalty shall be in lieu of, and not in addition to
any other penalty imposed under the section of law
described in #2, above.
4. Provides that if the employer is currently insured, or
becomes insured during the period during which the above
penalty is being determined, the amount an employer
would have paid in workers' compensation premiums shall
be calculated by prorating the current premium for the
number of weeks the employer was uninsured.
5. Provides that if the employer is uninsured at the time
the above penalty is being determined, the amount an
employer would have paid in workers' compensation
premiums shall be calculated by applying the rating for
that type/class of worker as determined by the Workers'
Compensation Insurance Rating Bureau (WCIRB) and the
Insurance Commissioner to the number of weeks the
employer was uninsured.
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6. Provides that if the employer contends that the
assignment of the governing classification is incorrect,
or that any employee should be assigned to a different
classification, the employer has the burden to prove
that the different classification should be utilized.
This bill:
1. Increases the per-employee penalty for the lack of
workers' compensation coverage from $1000 to $1500.
2. Provides the director of the Department of Industrial
Relations with the option to issue a penalty assessment
order either:
A. Under the provisions related to a stop-work
order and the $1500 penalty.
B. Under the provisions setting forth the procedure
for securing payment of unpaid workers'
compensation premiums in conjunction with the
per-employee penalty.
3. Establishes the period for the prorating of back
premiums at three years.
4. Provides that if the employer is uninsured at the time
the above penalty is being determined, the amount an
employer would have paid in workers' compensation
premiums shall be the product of the employer's payroll
within the three-year period immediately prior to the
date the above penalty assessment is issued multiplied
by a rate determined in accordance with regulation that
may be adopted by the Labor Commissioner or, if none has
been adopted, the average insurer rate per $100 of
payroll as reported in the most recent summary published
by the rating organization designated by the Insurance
Commissioner (i.e. the WCIRB).
5. Deletes the provisions regarding the governing
classification to which each employee of an uninsured
employer shall be assumed to be assigned under the
provisions of this section.
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Comments
In addition to enhancing the penalties for employer
non-compliance with worker's compensation law, this bill
attempts to fix an unintended conflict in Labor Code
Section 3722 as reported by the Division of Labor Standards
Enforcement and the Commission on Health and Safety and
Workers Compensation. This unintended conflict may be
explained as follows:
1. Labor Code Section 3722(a) provides that the director
shall issue a penalty assessment of $1000 where he/she
has identified an employer who is not providing workers'
compensation coverage for employees and where the
director has issued a stop-work order on the employer
for lack of such coverage.
2. Labor Code Section 3722(b) provides for a procedure for
determining what back premium payments are owed by the
employer and requires payment of premiums and specified
penalties. But this subsection also states that its
penalties may not be in addition to penalties assessed
under 3722(a).
3. Since Labor Code 3722(a) specifies that in the case
where the director is required to issue a stop-work
order the director must issue a penalty order of $1000,
there remains no option for the director to require
payment of back premiums and associated penalty
assessments because 3722(b) prohibits any penalty
imposed in addition to that in 3722(a).
4. Thus, in effect, in cases involving required stop orders
often, egregious examples no back premiums and
associated penalties may be collected.
Finally, an additional problem with the existing law is
that it may be difficult for enforcement agencies to
determine what premiums may be owed because this requires
an evaluation of how many workers were on a payroll over a
lengthy period in the past, what type of work they were
doing, and what rating they would each have had as
determined under the rating plan devised by the Workers'
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Compensation Insurance Rating Bureau all in consultation
with the Insurance Commissioner. This bill provides for a
simpler and more efficacious means of assessing premiums
and penalties owing.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/19/09)
Small Business California (source)
Acclamation Insurance Management Services
American Federation of State, County and Municipal
Employees, AFL-CIO
CAL Insurance and Associates, Inc.
California Applicants' Attorneys Association
California Association of Psychiatric Technicians
California Chamber of Commerce
California Labor Federation, AFL-CIO
California School Employees Association, AFL-CIO
Efficiency Data & Development
Glendale City Employees Association
Organization of SMUD Employees
Safeway Inc.
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
ARGUMENTS IN SUPPORT : The author's office and supporters
of this bill, believe the bill creates a more effective
penalty structure for employers that fail to maintain
workers' compensation coverage. They argue that under the
current scheme employers may face a penalty that is less
than what their workers' compensation costs would have,
thus creating a disincentive to have coverage. Other
proponents say that certain employers' failure to maintain
coverage creates an unfair competitive advantage for
violators of the law. Further, the money recovered by the
penalties will be deposited into the Fund. This fund
provides benefits to the injured employees of illegally
uninsured employers, and most that funding comes from a
levy on law-abiding employers. This bill reduces the
amount law-abiding employers have to pay to the Fund.
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AGB:do 5/19/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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