BILL ANALYSIS �
SB 777
Page 1
SENATE THIRD READING
SB 777 (Lieu)
As Amended January 4, 2012
Majority vote
SENATE VOTE :22-13
INSURANCE 9-3
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|Ayes:|Solorio, Bradford, Fong, | | |
| |Carter, Feuer, Hayashi, | | |
| |Skinner, Torres, | | |
| |Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Hagman, Beth Gaines, | | |
| |Miller | | |
| | | | |
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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.
SB 777
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COMMENTS :
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 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.
Background. Professor Frank Neuhauser of the University of
California, 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'
SB 777
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compensation fraud.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
FN: 0004171