BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 459 (Corbett)
Hearing Date: 5/26/2011 Amended: 3/23/2011
Consultant: Bob Franzoia Policy Vote: L&IR 5-2 Judiciary
3-1
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BILL SUMMARY: SB 459 would do the following:
- Authorize the Labor and Workforce Development Agency to assess
civil penalties on employers found to be engaging in the willful
misclassification of an employee as an independent contractors
or the charging of an employee who have been willfully
misclassified a fee or making any deductions from compensation.
- Require employers to provide to a person hired as an
independent contractor, when that person is hired, a form that
includes a notice that the person has been hired as an
independent contractor, a statement explaining the impact that
the person's status as an independent contractor has on tax
obligations and eligibility for labor and employment
protections, and a notice of the person's ability to seek advice
from the Employment Development Department (EDD) or the Labor
Commissioner as to whether the person is properly classified as
an independent contractor.
- Require the person employing labor in this state to maintain,
for a period of no less than two years, records of the
independent contractors hired by that person which include
specified information concerning each independent contractor,
and to make these records available for inspection.
-Require EDD to develop a form that includes a notice to an
independent contractor regarding the impact that status as an
independent contractor has on the individual's tax obligations
and eligibility for labor and employment protections, and a
notice that the independent contractor may seek advice from EDD
or Labor Commissioner as to whether the person is properly
classified as an independent contractor.
- Require EDD to process a request for advice by a person
regarding whether that person is an independent contractor or
employee, and to take all steps reasonably necessary to carry
out the duties described in these provisions.
- Male other changes relating to liability, records inspection
and access.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Increased enforcement $200-$1,000$400-$2,000 $400-$2,000
Special*
costs
EDD verification process Minor, absorbable costs
SB 459 (Corbett)
Page 3
ongoing Special*
Inspection of records Minor, absorbable costs ongoing Special*
* Labor Enforcement and Compliance Fund
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STAFF COMMENTS: SUSPENSE FILE.
The provisions of this bill would likely be enforced by the
Division of Labor Standard Enforcement within the Department of
Industrial Relations. Staff is unaware of any data which would
assist in estimating the frequency of violations where there is
a willful misclassification or payment of employees. EDD would
have enforcement responsibilities where there was nonpayment of
unemployment insurance taxes. The Franchise Tax Board would
have enforcement responsibilities where there was nonpayment of
employment taxes.
To provide the committee with some estimate of the fiscal impact
of adding Labor Code 226.8, preliminary information indicates
one deputy is able to investigate and hear approximately 25
cases involving labor standards violations. If the division,
which has a backlog of approximately 1,000 cases, receives 100
to 500 additional complaints annually, the division would
require 4 to 20 new deputies to pace with the workload. At an
average of $100,000 per personnel year for salary and benefits,
the bill would have a fiscal impact of $400,000 to $2,000,000
annually. Staff notes however, that willful, generally an
intentional or voluntary violation of a known legal duty, is a
higher test and may make it more difficult to find a violation,
thereby constraining the number of enforcement actions.