BILL ANALYSIS
SB 313
Page 1
SENATE THIRD READING
SB 313 (DeSaulnier)
As Amended September 2, 2009
2/3 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 Commissioner (IC).
3)Specifies that the classification shall be determined by the
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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.
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 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
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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 :
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:
0002806