BILL ANALYSIS
SB 313
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Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
SB 313 (DeSaulnier) - As Amended: June 29, 2009
SENATE VOTE : 39-0
SUBJECT : Workers' Compensation: penalties for failure to
procure coverage
SUMMARY : Restructures the laws governing penalties to be
assessed on employers that do not comply with the law mandating
that every employer provide, either through insurance or an
approved self-insurance program, workers' compensation benefits
for its employees. Specifically, this bill :
1)Increases from $1,000 to $1,500 per employee the penalty
amount that shall be assessed against an employer that is
violating the mandate to provide workers' compensation
coverage, and clarifies that the penalty formula described in
2), below, is alternative to this potential penalty.
2)Provides that instead of the current formula, the penalty to
be imposed on an employer for failing to provide workers'
compensation coverage for its employees shall be the product
of the employer's payroll for the 3 years prior to the date
the penalty assessment is issued and a rate to be adopted by
the Labor Commissioner, or, if no rate is adopted, the proper
classification codes from the Workers' Compensation Insurance
Rating Bureau (WCIRB), or, if the employer is out of business,
from other information the Director of the Department of
Industrial Relations (Director) may have.
3)Specifies that any additional moneys collected from violators
as a result of the changes to the penalty structure made by
this bill shall be deposited into the Uninsured Employers
Benefits Trust Fund (UEBTF) - which is the fund that pays for
benefits for employees injured while working for uninsured
employers -- and used only for non-administrative expenses
upon appropriation by the Legislature.
EXISTING LAW :
1)Requires every employer, except the state, to secure the
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payment of workers' compensation for employees for injuries
arising out of, or in the course of, employment, either by
purchasing insurance from a qualified workers' compensation
insurer, or by obtaining a certificate of self-insurance from
the Office of Self-Insurance Programs in the Department of
Industrial Relations (DIR).
2)Specifies that the director shall issue and serve a penalty
assessment order of $1,000 per employee on an employer that is
found to be without workers' compensation coverage and on whom
a stop-work order has been imposed due to the lack of
coverage. The penalty moneys are deposited in the UEBFT,
which is funded by an employer assessment plus the fines and
penalties.
3)Provides that at any time 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 a
penalty that is the greater of: (1) twice the amount the
employer would have paid in workers' compensation premiums
during the period the employer was uninsured or (2) the sum of
one thousand dollars ($1,000) 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 number 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.
FISCAL EFFECT : This bill was referred to the Senate Floor from
the Senate Appropriations Committee pursuant to Senate Rule
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28.8, indicating negligible costs associated with its
implementation.
COMMENTS :
1)Purpose . According to the author, modernizing the penalty
structure will have a deterrent effect on uninsured employers.
Currently, it is very difficult to calculate the proper
penalty for an uninsured employer because it is difficult to
determine how many, and what kind of, employees were working
for the employer over the 3-year period. In addition, there
is a conflict between the two provisions detailing penalties
that the bill clarifies by making the more detailed penalty
formula an alternative to the flat "per employee" penalty.
2)Support . Supporters argue that the current penalty structure
often results in penalties that are lower than what the cost
of obtaining insurance would have been. Thus, there is little
incentive to comply with the law if the penalties for
violations are lower than the cost of compliance. Supporters
further note that depositing penalty moneys into the UEBFT
will reduce the burden on law-abiding employers.
REGISTERED SUPPORT / OPPOSITION :
Support
Small Business California (sponsor)
American Federation of State, County and Municipal Employees,
AFL-CIO
CAL Insurance and Associates, Inc.
California Applicants' Attorneys Association (CAAA)
California Chamber of Commerce
California Conference of Carpenters
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
Opposition
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None received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086