BILL ANALYSIS �
SB 777
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Date of Hearing: June 20, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
SB 777 (Lieu) - As Amended: January 4, 2012
SENATE VOTE : 22-13
SUBJECT : Workers' compensation: sharing coverage data
SUMMARY : Designates the Director of the Department of
Industrial Relations (DIR) as the public official who determines
the reasonableness of requests to share data among state
agencies with respect to investigations into whether employers
are in compliance with the requirement to maintain workers'
compensation coverage.
EXISTING LAW :
1)Requires every employer in the state to maintain workers'
compensation coverage, either in the form of an insurance
policy issued by a qualified insurer, or by obtaining a
certificate of self-insurance from DIR.
2)Requires the Labor Commissioner to operate a program to
investigate illegally uninsured employers.
3)Requires specified state agencies that have relevant data that
might assist the Labor Commissioner in this endeavor to
provide that data upon reasonable request from the Labor
Commissioner.
FISCAL EFFECT : Unknown, but unlikely to have a significant
impact on DIR.
COMMENTS :
1)Purpose . According to the author, the State of California
faces significant challenges from the underground economy,
which is defined by the Employment Development Department as
individuals and businesses that deal in cash and/or use other
schemes to conceal their activities and their true tax
liability from government licensing, regulatory, and taxing
agencies. In short, it is an entire universe of illegal
activities that can include such diverse activities as tax
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fraud, cigarette smuggling, and failure to provide employees
the minimum wage. A 2005 Legislative Analyst's Office study on
the underground economy estimated that California loses $6.5
billion in annual income tax revenues.
One of the most egregious activities by employers who
participate in the underground economy is workers'
compensation fraud. This can include failure by the employer
to report all of his or her employees to the insurance company
when creating a policy, misreporting the type of work done by
employees, or even failing to secure any workers' compensation
coverage for all employees.
2)Background . Professor Frank Neuhauser of UC Berkeley
estimates that $15 to $68 billion of annual payroll in
California went unreported, or 4-12% of the total payroll in
California. These figures do not include wages or employees
that were misreported into a lower premium class.
On January 1st of this year, DIR launched the new Labor
Enforcement Task Force (LETF). The primary partners of the
LETF include DIR, the Employment Development Department,
Contractor's State License Board, Board of Equalization, and
the Bureau of Automotive Repair. According to DIR, the focus
of the Task Force on collaboration, wider information-sharing,
and use of new technology for enforcement will ensure more
effective targeting of businesses in the underground economy.
This bill seeks to strengthen ongoing and existing efforts by
DIR and LETF to combat the underground economy by encouraging
data sharing among governmental agencies by clarifying lines
of authority when determining the reasonableness of a request
for data or information in the investigation of workers'
compensation fraud.
REGISTERED SUPPORT / OPPOSITION :
Support
Spa and Pool Industry Education Council
Opposition
None received.
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Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086