BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  SB 691
                                                                  Page  1

          Date of Hearing:   June 20, 2012

                           ASSEMBLY COMMITTEE ON INSURANCE
                                 Jose Solorio, Chair
                     SB 691 (Lieu) - As Amended:  January 4, 2012

           SENATE VOTE :   33-0
           
          SUBJECT  :   Employment Development Department: Information 
          Sharing

           SUMMARY  :   Permits information sharing between the Employment 
          Development Department (EDD) and the Contractors' State License 
          Board (CSLB) to assist with its workers' compensation fraud 
          investigations.

           EXISTING LAW:

          1)Permits EDD to share information to aid workers' compensation 
            fraud investigations conducted by the:

               a)     District Attorney of any county,

               b)     Attorney General,

               c)     Department of Industrial Relations, or

               d)     Department of Insurance.

           FISCAL EFFECT  :   The bill was referred to the Senate Floor by 
          the Senate Appropriations Committee pursuant to Senate Rule 
          28.8.

           COMMENTS  :   

           1)Purpose.   According to the author, this bill seeks to assist 
            the CSLB in their investigation of worker's compensation fraud 
            by permitting the EDD to share employment data and information 
            with the CSLB for the purposes of investigating any specific 
            workers' compensation fraud investigation.

           2)Workers' Compensation Fraud.   One form of workers' 
            compensation fraud committed by unscrupulous employers is the 
            failure by the employer to report all of his or her employees 
            to the insurance company when creating a policy, misreporting 








                                                                  SB 691
                                                                  Page  2

            the type of work done by employees, or even failing to secure 
            workers' compensation coverage for all employees.  

            Testimony provided to the Senate Select Committee on Small 
            Business and the Underground Economy in 2011 indicated that 
            $15 to $68 billion of annual payroll in California went 
            unreported, or 4-12% of the total payroll in California.  This 
            lack of reporting by unscrupulous employers has significantly 
            the increased premiums paid by law-abiding employers.  The 
            increase in premiums creates competitive pressures for 
            law-abiding employers to engage in underreporting or go out of 
            business.

           3)CSLB.   As the agency responsible for licensing contractors, 
            CSLB has frequent contact with employers engaged in workers' 
            compensation fraud.  Contractors such as roofers and 
            electricians face some of the highest workers' compensation 
            premiums due to injuries, but also suffer from some of the 
            most significant rate distortion due to misreporting and 
            underreporting.  While the CSLB must ensure that licensed 
            contractors appropriately maintain workers' compensation 
            coverage, they do not currently have statutory access to EDD's 
            databases to investigate possible workers' compensation fraud. 
             

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Contractors State License Board
          AFSCME
          Spa & Pool Industry Education Council
           
           Opposition 
           
          None Received.

           Analysis Prepared by  :    Paul Riches / INS. / (916) 319-2086