BILL ANALYSIS �
SENATE COMMITTEE ON PUBLIC SAFETY
Senator Loni Hancock, Chair S
2011-2012 Regular Session B
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SB 1177 (Leno) 7
As Introduced February 22, 2012
Hearing date: April 17, 2012
Penal Code and Labor Code
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RESTITUTION AND WORKERS' COMPENSATION:
CRIMES COMMITTED BY EMPLOYERS AGAINST EMPLOYEES
HISTORY
Source: San Francisco County District Attorney
Prior Legislation: None directly on point
Support: California District Attorneys Association; California
Labor Federation
Opposition:None known
KEY ISSUE
WHERE AN EMPLOYER HAS COMMITTED A CRIME AGAINST AN EMPLOYEE, SHOULD
THE EMPLOYER'S CRIMINAL RESTITUTION OBLIGATION NOT BE OFFSET BY
WORKER'S COMPENSATION INSURANCE PAYMENTS MADE TO THE VICTIM UNLESS
THE EMPLOYER HAS FULLY PAID ALL WORKERS' COMPENSATION PREMIUMS?
PURPOSE
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The purpose of this bill is to provide that where an employer
has been convicted of a crime against an employee, the
employer's criminal restitution obligation cannot be offset by
payments made to the employee or the employee's dependents
unless the employer has fully paid all workers' compensation
insurance premiums.
Existing provisions in the California Constitution state that
all persons who suffer losses as a result of criminal activity
shall have the right to restitution from the perpetrators of
these crimes. Restitution shall be ordered in every case unless
compelling and extraordinary reasons exist to the contrary. The
Legislature shall adopt provisions to implement this section
during the calendar year following adoption of this section.
(Cal. Const. Art. 1 � 28, subd. (b).)
Existing law states legislative intent that a victim of crime
who incurs any economic loss as a result of the commission of a
crime shall receive restitution directly from any defendant
convicted of that crime. (Pen. Code � 1202.4, subd. (a)(1).)
Existing law directs the court to order a defendant to make
restitution to the victim or victims of the defendant's crime.
The court shall order full restitution for the losses caused by
the defendant's crime unless the court finds and states
compelling and extraordinary reasons for not doing so. (Pen.
Code � 1202.4, subd. (f).)
Existing law provides that a criminal restitution order shall be
enforceable as though it were a civil judgment. (Pen. Code �
1202.4, subd. (i).)
Existing law provides that, in the event of a compensable
industrial injury, workers' compensation is the sole and
exclusive remedy of the employee or his or her dependents
against the employer. Further, with specified exceptions, the
employee or his or her dependents may not bring a civil action
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for damages against the employer. (Labor Code �3602.)
Existing law provides that in the following circumstances an
employee can obtain remedies or damages from the employer other
than through workers' compensation:
Where the employee's injury or death is proximately
caused by a willful physical assault by the employer.
(Labor Code � 3602.)
Where the employee's injury is aggravated by the
employer's fraudulent concealment of the existence of the
injury and its connection with the employment. (Labor Code
�3602.)
Where the employer fails to secure workers' compensation
coverage for his or her employees. (Labor Code � 3706.)
Where the employee's injury or death is proximately
caused by the employer's knowing removal of, or knowing
failure to install, a point of operation guard on a power
press. (Labor Code � 4558.)
This bill provides that where an employer has been convicted of
a crime against an employee, workers' compensation payments made
to the victim or a family member shall not offset the amount of
restitution unless the employer had fully paid workers'
compensation insurance premiums.
RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION
("ROCA")
In response to the unresolved prison capacity crisis, since
early 2007 it has been the policy of the chair of the Senate
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Committee on Public Safety and the Senate President pro Tem to
hold legislative proposals which could further aggravate prison
overcrowding through new or expanded felony prosecutions. Under
the resulting policy known as "ROCA" (which stands for
"Receivership/Overcrowding Crisis Aggravation"), the Committee
has held measures which create a new felony, expand the scope or
penalty of an existing felony, or otherwise increase the
application of a felony in a manner which could exacerbate the
prison overcrowding crisis by expanding the availability or
length of prison terms (such as extending the statute of
limitations for felonies or constricting statutory parole
standards). In addition, proposed expansions to the
classification of felonies enacted last year by AB 109 (the 2011
Public Safety Realignment) which may be punishable in jail and
not prison (Penal Code section 1170(h)) would be subject to ROCA
because an offender's criminal record could make the offender
ineligible for jail and therefore subject to state prison.
Under these principles, ROCA has been applied as a
content-neutral, provisional measure necessary to ensure that
the Legislature does not erode progress towards reducing prison
overcrowding by passing legislation which could increase the
prison population. ROCA will continue until prison overcrowding
is resolved.
For the last several years, severe overcrowding in California's
prisons has been the focus of evolving and expensive litigation.
On June 30, 2005, in a class action lawsuit filed four years
earlier, the United States District Court for the Northern
District of California established a Receivership to take
control of the delivery of medical services to all California
state prisoners confined by the California Department of
Corrections and Rehabilitation ("CDCR"). In December of 2006,
plaintiffs in two federal lawsuits against CDCR sought a
court-ordered limit on the prison population pursuant to the
federal Prison Litigation Reform Act. On January 12, 2010, a
three-judge federal panel issued an order requiring California
to reduce its inmate population to 137.5 percent of design
capacity -- a reduction at that time of roughly 40,000 inmates
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-- within two years. The court stayed implementation of its
ruling pending the state's appeal to the U.S. Supreme Court.
On May 23, 2011, the United States Supreme Court upheld the
decision of the three-judge panel in its entirety, giving
California two years from the date of its ruling to reduce its
prison population to 137.5 percent of design capacity, subject
to the right of the state to seek modifications in appropriate
circumstances. Design capacity is the number of inmates a
prison can house based on one inmate per cell, single-level
bunks in dormitories, and no beds in places not designed for
housing. Current design capacity in CDCR's 33 institutions is
79,650.
On January 6, 2012, CDCR announced that California had cut
prison overcrowding by more than 11,000 inmates over the last
six months, a reduction largely accomplished by the passage of
Assembly Bill 109. Under the prisoner-reduction order, the
inmate population in California's 33 prisons must be no more
than the following:
167 percent of design capacity by December 27, 2011
(133,016 inmates);
155 percent by June 27, 2012;
147 percent by December 27, 2012; and
137.5 percent by June 27, 2013.
T5his bill does not aggravate the prison overcrowding crisis
described above under ROCA.
COMMENTS
1. Need for This Bill
According to the author:
SB 1177 will enable more victims and victims' families
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- in the event of a serious workplace injury or death
where the employer is criminally responsible - to
receive full restitution from the convicted employer.
Under California law, an employer may be charged
criminally when an employee is killed or seriously
injured on the job. Upon conviction, the employer will
be ordered to pay restitution to the victim or
victim's family, which can include medical expenses
and lost future wages.
If the victim or victim's family receives workers'
compensation benefits from the employer's insurer, the
employer will typically seek to reduce its restitution
obligation to the victim or victim's family by arguing
that the employer is entitled to an "offset" for those
benefits - that is, the employer will assert that
restitution owed should be reduced (offset) by the
amount of any workers' compensation insurance payments
made to the victim or family.
However, in some cases, the convicted employer has
also been defrauding its workers' compensation
insurance carrier by, for example, underreporting or
failing to report the employee's wages. Despite this,
the employer may still claim a workers' compensation
offset to the restitution ordered by the court.
Victims and victims' families are not receiving their
full restitution amounts from employers who defrauded
their workers' compensation insurer. In addition,
employers who are following the law are at a
competitive disadvantage when less scrupulous
employers cut corners for their employee's workplace
safety and workers compensation coverage. Furthermore,
criminally negligent employers are getting the extra
benefit of restitution offsets when they have
defrauded their workers' compensation insurer.
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2. Amendments Agreed to in Labor Committee and to be Taken in
Public Safety
The bill was approved by the Labor Committee on Wednesday, April
11, 2012. The author agreed to take amendments at the
suggestion of Labor Committee staff.
The first amendment makes specified provisions in the Labor Code
parallel to and consistent with the changes to the Penal Code
restitution provision made by this bill. According to the Labor
Committee analysis, the parallel provisions in the Labor Code
would inform employers, claims administrators, practitioners,
administrative law judges and interested parties about the
changes to the Penal Code restitution provision in cases
involving industrial injury crimes.
The amendments recommended by the Labor Committee staff also
included technical amendments that make terms and definitions in
this bill consistent with the terms used in the Labor Code. The
author has accepted these amendments. The amendments will be
taken during the hearing on the bill in this Committee.
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3. Case That Prompted Introduction of This Bill
This bill was prompted by restitution issues that arose in a
2011 San Francisco County case, People v. Shim, Kim, and
California C&R, Inc. In that case, Sam Shim and California C&R,
Inc., pled guilty to multiple felony counts in the death of
Antonio Martinez, an employee of California C&R. Mr. Martinez
had fallen off of a four-story apartment building in 2008.
According to the prosecutor's brief to the court on the
restitution issue, Mr. Martinez had been employed by California
C&R, Inc. for over a decade, but his employer failed to report
his employment to either the Employment Development Department
(EDD) or the State Compensation Insurance Fund (SCIF).
Martinez was paid in cash. On the day of Martinez's death, none
of the roofers were wearing any form of fall protection, there
were no railings, scaffolds or other physical barriers
preventing a fall to the sidewalk, and there was no supervision
of work along the roof's edge. These circumstances were all
violations of Cal/OSHA regulations. Defendant Shim pled guilty
to four felonies (involuntary manslaughter, willful violation of
Cal/OSHA regulations resulting in a death, workers' compensation
fraud, and tax fraud), California C&R pled guilty to one felony
(willful violation of Cal/OSHA).
The defendants were ordered to pay restitution to Martinez's
survivors. The defendants argued that they were entitled to a
set-off against restitution for the amount of benefits paid to
Martinez's family by the State Compensation Insurance Fund
(SCIF). The prosecutor argued that the defendants were not
entitled to a reduction in restitution based on the amount of
compensation paid by SCIF to the family. Since the defendants
had not paid workers' compensation premiums for Martinez, the
benefit paid to Martinez's family were not paid on behalf of the
defendants. The payments should not be attributed to the
defendants. The trial court ruled for the defendant. The
matter is now pending in the Court of Appeal, First Appellate
District.
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4. Issue of Double Payments to Victim if Defendant Must Pay
Restitution Without Deductions for Insurance Payments made to
the Victim - Right of Insurer to Seek Reimbursement
In the case that prompted introduction of this bill, the
defendant argued that the surviving family of the deceased
victim of an industrial accident would improperly receive double
compensation if the defendant was forced to pay restitution for
damages or losses for which the unemployment insurance company
had already paid. In similar cases the courts have held that
the law clearly requires the defendant to pay full restitution
for all economic losses suffered by the victim, regardless of
whether the victim received compensation from other sources,
including insurance.
The courts, however, noted that the insurance carrier, or other
third-party payer, can seek reimbursement from the victim for
any amounts provided by other sources. (People v. Hume (2008)
196 Cal.App.4th 990, 995-996.) However, the court acknowledged
that a victim could receive a form of windfall if the third
party payer did not exercise its right to seek reimbursement.
(Ibid.)
The court in Hume did note an exception to the rule that a
defendant's restitution obligations cannot be offset by payments
made to the victim by third parties, including the victim's own
insurance carrier:<1> (Ibid.) Where the defendant's own
insurance carrier compensates the victim of a crime committed by
the defendant, the defendant's restitution obligation is reduced
or offset by the amount of compensation paid by the defendant's
insurer. (People v. Bernal (2002) 101 Cal.App.4th 155, 167-168.
This exception depends on the following factors and
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<1> For example, where a residential burglary victim receives
compensation from his or her own insurance company for damages
caused by the break-in and for the value of stolen items, the
defendant's restitution obligation is not reduced by the
recovery received by the victim from the victim's own insurance
carrier.
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justifications:
The defendant purchased the insurance and made payments
on the policy to cover the defendant for this kind of
situation;
The defendant paid premiums to keep the policy active;
The defendant has a contractual right to have the
insurance company pay the victim; and
The insurance company has no indemnity or subrogation
rights against the defendant (essentially establishing that
payment to the victim was directly from the defendant by
means of the insurance contract between the defendant and
his insurer). (Ibid.)
This bill seeks to clarify application of the rule described
above in cases where the defendant did not pay the premiums
required by the insurance contract.
WHERE AN EMPLOYER HAS BEEN CONVICTED OF A CRIME AGAINST AN
EMPLOYEE, SHALL WORKERS' COMPENSATION PAYMENTS MADE TO THE
EMPLOYEE OFFSET OR REDUCE THE AMOUNT OF RESTITUTION THE EMPLOYER
OWES THE EMPLOYEE ONLY IF THE EMPLOYER HAS PAID ALL PREMIUMS ON
HIS OR HER WORKERS' COMPENSATION INSURANCE POLICY?
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