BILL ANALYSIS
SB 313
Page 1
SENATE THIRD READING
SB 313 (DeSaulnier)
As Amended August 24, 2009
Majority vote
SENATE VOTE :39-0
INSURANCE 10-0 APPROPRIATIONS 17-0
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|Ayes:|Solorio, Garrick, |Ayes:|De Leon, Conway, Ammiano, |
| |Anderson, Charles | | |
| |Calderon, Carter, Feuer, | |Charles Calderon, Coto, |
| |Hayashi, Nava, Niello, | |Davis, Duvall, Fuentes, |
| |Torres | |Hall, Harkey, Miller, |
| | | |John A. Perez, Skinner, |
| | | |Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Hill |
|-----+--------------------------+-----+--------------------------|
| | | | |
| | | | |
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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 three 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
manual rate or rates used by the State Compensation Insurance
Fund for the employers governing classification as defined by
the standard classification system approved by the Insurance
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Commissioner (IC).
3)Specifies that the classification shall be determined by the
inspector at the time the assessment is issued based on the
information available at the time, and presumes subject to
subsequent rebuttal by the employer that the wage level for
the uninsured employees was equal to the state average weekly
wage.
4)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
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 of the California Employment
Development Department (EDD) 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 of EDD 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
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assessment order that requires the uninsured employer to pay a
penalty that is 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 $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 and the IC to the number of weeks the employer
was uninsured.
FISCAL EFFECT : According to the Assembly Appropriations
Committee :
1)Under current law $4.5 million in penalty assessments were
collected in 2008. Therefore, this bill increases the
collection of these penalties by more than $2.2 million
special fund attributable to the 50% increase in the per
employee penalty from $1,000 to $1,500.
2)This bill results in additional, unknown special fund revenues
to the extent the alternative penalty calculation modified in
this bill is levied. A core component of the alternative
penalty is twice the amount the employer would have paid to
have been insured during the prior three-year period.
COMMENTS :
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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 three-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.
Analysis prepared by: Mark Rakich / INS. / (916) 319-2086
FN: 0002394