BILL ANALYSIS �
SB 1177
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Date of Hearing: June 12, 2012
Counsel: Sandy Uribe
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Tom Ammiano, Chair
SB 1177 (Leno) - As Amended: April 19, 2012
As Proposed to be Amended in Committee
SUMMARY : Provides that where an employer is convicted of a
crime against an employee, the restitution order shall not be
offset by workers' compensation payments unless the employer has
paid workers' compensation insurance premiums in accordance with
the law. Specifically, this bill :
1)Provides that where an employer is convicted of a crime
against an employee, the restitution order shall not be offset
by workers' compensation insurance payments unless the court
finds substantial evidence that all insurance premiums have
been made in full accordance with the law.
2)Makes technical, non-substantive changes.
EXISTING LAW :
1)States it is the unequivocal intention of the People of the
State of California that all persons who suffer losses as a
result of criminal activity shall have the right to
restitution from the persons convicted of the crimes for
losses they suffer. Restitution shall be ordered from the
convicted persons in every case, regardless of the sentence or
disposition imposed, in which a crime victim suffers a loss,
unless compelling and extraordinary reasons exist to the
contrary. �Cal. Const., Art. I, sec. 28(b).]
2)Declares legislative intent that a crime victim who incurs an
economic loss as a result of the commission of a crime shall
receive restitution directly from the convicted defendant.
�Penal Code Section 1202.4(a)(1).]
3)Requires full victim restitution for economic losses
determined by the court. �Penal Code Section 1202.4(f).]
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4)States that economic losses include, but are not limited to,
the following: full or partial payment for the value of
stolen or damaged property; medical expenses; mental health
counseling expenses; wages or profits lost due to injury
incurred by the victim, and if the victim is a minor, wages or
profits lost by the minor's parent, parents, guardian, or
guardians, while caring for the injured minor; wages or
profits lost by the victim, and if the victim is a minor,
wages or profits lost by the minor's parent, parents,
guardian, or guardians, due to time spent as a witness or in
assisting the police or prosecution; noneconomic losses,
including, but not limited to, psychological harm, for felony
violations of Penal Code Section 288; interest at the rate of
10% per annum; actual and reasonable attorney's fees and other
collection costs; relocation expenses incurred by an adult
victim; expenses to install or increase residential security;
expenses to retrofit a residence or vehicle, or both, to make
the residence accessible to or the vehicle operational by the
victim, where the victim suffers permanent disability as a
direct result of the crime; and expenses to monitor and repair
the credit report of a victim of identity theft. �Penal Code
Section 1202.4(f).]
5)Defines a "victim" for purposes of restitution, as including
any of the following:
a) The immediate surviving family of the actual victim;
b) Any corporation, business trust, estate, trust,
partnership, association, joint venture, government,
governmental subdivision, agency, or instrumentality, or
any other legal or commercial entity when that entity is a
direct victim of a crime; and
c) Any person who has sustained economic loss as the result
of a crime and who satisfies any of the following
conditions:
i) At the time of the crime was the parent,
grandparent, sibling, spouse, child, or grandchild of the
victim;
ii) At the time of the crime was living in the household
of the victim;
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iii) At the time of the crime was a person who had
previously lived in the household of the victim for a
period of not less than two years in a relationship
substantially similar to a relationship listed above;
iv) Is another family member of the victim, including,
but not limited to, the victim's fianc� or fianc�e, and
who witnessed the crime; or
v) Is the primary caretaker of a minor victim. �Penal
Code Section 1202.4(k).]
6)Provides that a criminal restitution order shall be
enforceable as though it were a civil judgment. �Penal Code
Sections 1202.4(a)(3)(B) and (i).]
7)States that the determination of the amount of restitution
ordered shall not be affected by the indemnification or
subrogation rights of any third party. �Penal Code Section
1202.4(f)(2).]
8)Vests authority in the Legislature to create and enforce a
system for workers compensation making adequate provisions for
the comfort, health, safety, and general welfare of any and
all workers and those dependent upon them for support to the
extent of relieving from the consequences of any injury or
death incurred or sustained by workers in the course of their
employment, irrespective of the fault of any party.
(California Constitution, article XIV, section 4.)
9)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, and
that the employee or the employee's dependents cannot bring a
civil action for damages against the employer, except under
specified circumstances. (Labor Code Section 3602.)
10)Provides that an employer is liable for a death benefit to
the dependents of an employee who dies as a result of a
work-related injury, and that, except in certain situations,
the death benefit is a dependent's exclusive remedy against
the employer for the employee's work-related death. �Labor
Code Sections 3600, 3602, and 4701(b).]
11)Specifies exceptions to the general rule that workers
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compensation is the exclusive remedy for an industrial injury,
including:
a) Where the employee's injury or death is proximately
caused by a willful physical assault by the employer (Labor
Code Section 3602);
b) 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
Section 3602);
c) Where the employer fails to secure workers' compensation
coverage for his or her employees (Labor Code Section
3706); and
d) 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 Section 4558.)
12)Provides that when an injury causes death the employer shall
be liable for all of the following:
a) Reasonable expenses of the employee's burial, as
specified.
b) A death benefit, to be allowed to the dependents when
the employee leaves any person dependent upon him or her
for support, as specified. (Labor Code Sections 4701 and
4702.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement : According to the author, "SB 1177 will
enable more victims and victims' families - 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
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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.
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. In addition, criminally negligent employers are
getting the extra benefit of restitution offsets when they
have defrauded their workers' compensation insurer.
SB 1177 is necessary to clearly state in statute that an
offset is prohibited unless the employer can prove that as of
the date of the workplace injury or death all policy premiums
actually owed were paid. Without offering such evidence to the
court, the employer will be required to pay full restitution
to the victim or victim's family without any offset for
workers' compensation insurance payments."
2)Effect of Insurance on Restitution Orders : The fact that a
victim has insurance to cover the loss caused by a criminal
defendant's conduct is irrelevant with respect to the
defendant's duty to make restitution to the victim. Payments
received by a crime victim from his or her insurance company
or from an independent third party for economic losses
suffered as a result of the defendant's criminal conduct
cannot reduce the amount of restitution the defendant owes.
�In re Brittany L. (2002) 99 Cal.App.4th 1381, 1389.] A crime
victim is entitled to restitution regardless of whether the
victim has submitted an insurance claim or has been partially
or fully reimbursed by his or her insurer. �People v Birkett
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(1999) 21 Cal.4th 226, 245-247.]
On the other hand, "when the victim has obtained a settlement
payment from a company that insured the defendant for civil
liability, the amount of the restitution order in a criminal
action must be offset by money paid to the victim by the
insurance company." �People v. Short (2008) 160 Cal.App.4th
899, 903; People v. Bernal (2002) 101 Cal.App.4th 155,
165-168.] The relationship between the defendant and the
insurance company is such that the victim is deemed to have
received the civil settlement payment "directly from the
defendant" within the meaning of Penal Code Section
1202.4(a)(1). (People v. Short, supra, 160 Cal.App.4th at p.
903.)
An offset is permitted, however, only to the extent that the
civil settlement and the restitution order constitute
compensation for the same items of loss. �People v. Jennings
(2005) 128 Cal.App.4th 42, 58; see also People v. Bernal,
supra, 101 Cal.App.4th at p. 168 (defendant entitled to offset
for payments "to the extent that those payments are for items
of loss included in the restitution order").]
3)People v. Shim, Kim and California C&R, Inc : The case that
prompted introduction of this bill is People v. Shim, Kim and
California C&R, Inc, San Francisco Court Nos. 10011927,
2451742, & 10011910. According to the prosecution brief
presented to this Committee, Antonio Martinez, an employee of
California C&R, a roofing company owned by defendant Shim,
fell off a four-story apartment building and died. On the day
of Martinez's death, the roofers were not wearing protective
gear, there were no railings, scaffolds, or other protective
barriers, and there was no supervision of work along the
roof's edge. These circumstances violated Cal/OSHA
regulations. Because the working conditions contributed to
Martinez's death, defendant Shim pled guilty to involuntary
manslaughter and to willful violation of Cal/OSHA regulations
resulting in death.
Additionally, because Mr. Martinez was an undocumented worker,
defendant Shim and his company had failed to report Martinez's
employment to the Employment Development Department (EDD) or
the State Compensation Insurance Fund (SCIF), and paid him in
cash. Defendant Shim also pled guilty to worker's
compensation premium fraud and tax fraud.
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At the 2011 restitution hearing in this case, defendant Shim
and California C&R Inc. stipulated to restitution to EDD in an
approximate amount of $3,000 and to SCIF in an approximate
amount of $108,000, the amount of unpaid premiums. As to the
decedent, SCIF had paid the Martinez family $320,000 in the
worker's compensation proceedings because workers'
compensation insurance was obtained by the roofing company and
premiums were paid to cover the employees. The insurance
carrier determined that under the terms of the policy all
employees were covered and that included Mr. Martinez.
Defendant Shim sought an offset of victim restitution to the
Martinez family. The prosecution argued that since defendant
had not paid premiums for Martinez specifically, the benefit
paid to his family was not paid on defendant's behalf and
there should be no offset.
The trial court ruled in favor of the defense, finding that
defendant Shim was entitled to an offset because he had paid
premiums and the victim had been made whole. The court noted
that to disallow the offset would doubly compensate the
victim's family. The court noted it would not be in the
interests of judicially economy to double compensate the
victim and then have the workers' compensation insurance
company sue the victim to get that money back. The court
noted that as to the fraud between the defendant and the
insurance carrier, that restitution claim had been settled.
4)Prematurity of this Bill : The case which prompted this bill
is currently pending in the First District Court of Appeal.
(People v. Shim et al., Appeal No. A134563.) The docket shows
the Appellant's Opening Brief was due on June 4, 2012, but it
has not yet been filed.
(.) Given that there is no Court
of Appeal opinion, the trial court's order is not binding
authority on any other court. In light of this, a legislative
"fix" to this perceived problem seems premature. It may set
bad precedent for the Legislature to pass legislation on trial
court orders that have not been subjected to the appellate
process and which are not final judgments. This bill raises
the possibility that parties to lawsuits who do not like the
result appeal to the Legislature rather than to the courts.
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5)Issue of Double Payment to the Victim : Victim restitution is
a constitutional guarantee. �Cal. Const., Art. I, sec.
28(b).] The Supreme Court has held that victim restitution
should "restore the economic status quo." �People v. Giordano
(2007) 42 Cal.4th 644, 658.] But "a restitution order is not
intended to provide the victim with a windfall." �People v.
Millard (2009) 175 Cal.App.4th 7, 28; People v. Chappelone
(2010) 183 Cal.App.4th 1159, 1172.]
This bill presumes that the defendant's worker's compensation
insurance carrier has made a payment to the victim of the
crime ("a payment to the employee or the employee's dependent
that is paid by the employer's workers' compensation insurance
carrier . . . . "). This bill then prohibits offset for
victim restitution by the defendant if the court finds
substantial evidence that the insurance premiums have not been
paid in full in accordance with the law. In such a case, the
defendant must pay full victim restitution, regardless of any
amount paid by his or her insurance. Therefore, this bill
raises the issue of the possibility of overcompensation to the
victim.
However, the workers' compensation system is a separate
constitutional guarantee. (California Constitution, article
XIV, section 4.) Liability for injury is based not on any act
or omission of the employer but rather on the existence of the
employer/employee relationship. �Bell v. Industrial Vangas,
Inc. (1981) 30 Cal.3d 268, 277.] Workers' compensation laws
provide for a variety of benefits to injured employees,
although the benefits are limited in comparison to civil
damages. Benefits include compensation for temporary
disability (Labor Code Sections 4650, 4650.5, 4652, and 4653),
permanent disability (Labor Code Sections 4061, 4062, 4650,
and 4658 to 4660), and medical care (Labor Code Sections 4600
to 4614.1). In the case of a death, the employer is liable
for burial expenses and a death benefit is also provided.
(Labor Code Section 4701.) The amount and duration of the
allowable death benefit is calculated based on the number of
total and partial dependents, whether or not they are minor
children. (Labor Code Sections 4702, 4703, and 4703.5.)
Therefore, it appears there are other economic losses
contemplated by the restitution statute that are not
compensated under workers' compensation, such as additional
future lost wages above and beyond those specified in the
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Labor Code or expenses to retrofit a residence or vehicle
where the victim suffers permanent disability as a direct
result of the crime. �See Penal Code Section 1202.4(f).]
Thus, because these losses are not considered in workers'
compensation benefits, any restitution for these losses would
not be a windfall for the victim.
6)Argument in Support : According to the California Labor
Federation , "Under current law, an employer may face criminal
charges following a workplace injury or fatality, and if
convicted, the employer will often be ordered to pay
restitution to the victim or victim's family.
"In some cases, an employer convicted in a workplace death has
also been defrauding his or her worker's compensation
insurance carrier by underreporting or failing to report the
employee's wages. Incredibly, the employer will likely assert
that restitution owed should be reduced by the amount of any
worker's compensation insurance payments made to the victim or
family.
"SB 1177 will prevent a defendant from benefiting from payments
made by an insurance company that the defendant himself has
defrauded. We can think of no reason to allow employers
engaged in worker's compensation fraud to avoid paying full
restitution to injured or killed workers."
7)Related Legislation : AB 2346 (Butler) provides that if a
corporation or person is convicted of the involuntary
manslaughter of an agricultural worker due to failure to
provide adequate shade or water, the court's restitution order
shall require the defendant to make restitution to the
immediate surviving family of the deceased, to be shared
equally, in an amount up to $1 million in compensation for
lost future earnings. SB 2346 is pending referral by the
Senate Rules Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
San Francisco District Attorney's Office (Sponsor)
California District Attorneys Association
California Labor Federation
Glendale City Employees Association
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Los Angeles County District Attorney's Office
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
Opposition
None
Analysis Prepared by : Sandy Uribe / PUB. S. / (916) 319-3744