BILL ANALYSIS �
SB 1177
Page 1
Date of Hearing: June 27, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
SB 1177 (Leno) - As Amended: June 19, 2012
SENATE VOTE : 37-0
SUBJECT : Restitution
SUMMARY : Provides that where an employer is convicted of a
crime against an employee, the restitution order shall not be
offset by workers' compensation death benefit 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 paid in full accordance with the law.
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 person 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.
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.
3)Defines "victim" for purposes of restitution to include the
victim's immediate family and members of the victim's
household.
4)Requires courts to provide full restitution for economic
losses to crime victims.
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5)Defines economic losses to include:
a) Full or partial payment for the value of stolen or
damaged property.
b) Medical expenses.
c) Mental health counseling expenses.
d) Lost wages or profits.
e) Noneconomic losses such as psychological harm.
f) Actual and reasonable attorney's fees and other
collection costs.
6)Provides that a criminal restitution order shall be
enforceable as though it were a civil judgment.
7)Establishes a workers' compensation system to provide benefits
to workers who are injured or die in the course of their
employment.
8)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.
9)Establishes exceptions to the general rule that workers
compensation is the exclusive remedy for an industrial injury,
including where:
a) The employee's injury or death is proximately
caused by a willful physical assault by the employer.
b) The employee's injury is aggravated by the
employer's fraudulent concealment of the existence of
the injury and its connection with the employment.
c) The employer fails to secure workers'
compensation coverage for his or her employees.
10)Provides that when a work-related injury causes death the
employer shall be liable for:
a) Reasonable expenses of the employee's burial.
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b) A death benefit for the employee's dependents.
FISCAL EFFECT : Unknown.
COMMENTS :
1)Purpose . According to the author, an employer may be charged
criminally when an employee is killed or seriously injured on
the job. If convicted, 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.
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)People v. Shim, Kim and California C&R, Inc : This bill was
introduced in response to a case involving the death of a
construction worker. Antonio Martinez died on January 16,
2008 when he fell from the roof of a four-story apartment
building in San Francisco. Martinez was working as a roofer.
In violation of Cal/OSHA regulations, 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. Ultimately, three defendants were charged and
pleaded guilty to charges relating to Martinez's death. In
addition, the owner of the roofing company was charged with
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and pleaded guilty to workers' compensation insurance premium
fraud and tax evasion. Despite employing Martinez for over a
decade and paying him cash in each quarter between 1998 and
his death in 2008, the company owner failed to include
Martinez's wages in any quarterly payroll reports to the State
Compensation Insurance Fund (SCIF) or to the Employment
Development Department (EDD).
As part of their sentences, defendants were ordered to pay
restitution to all of the victims in an amount to be
determined by the court at a restitution hearing. In
addition, the company owner and the company were ordered to
pay $108,206 in restitution to SCIF in connection with the
premium fraud counts and $3,152 in restitution to EDD in
connection with the tax evasion counts. At the restitution
hearing, the prosecution asserted that defendants should be
ordered to pay full restitution to the victim's family for
lost economic support (that is, Martinez's lost future
earnings minus his personal consumption) - without any offset
for insurance payments. The defense argued that under
California case law, defendants were entitled to offset their
restitution obligations by the $320,000 SCIF had paid the
family in the workers' compensation proceeding. The court
ultimately ruled in defendants' favor, holding that they were
entitled to a full restitution offset for insurance payments
to the victim's family. As a consequence, defendants were not
ordered to pay any restitution to the victim's family.
3)Pending Appeal . The case which prompted this bill is currently
pending in the First District Court of Appeal. The
Legislature generally has adhered to a policy of not
legislating based on a superior court decision, and allowing
appellate courts the opportunity to fulfill their role to
correct erroneous superior court decisions. However, there
are rare cases when the consequences of a superior court
decision are so egregious that legislative action is
warranted. In this case, the court's decision provided the
employer with the protection of an insurance policy after the
employer had systematically cheated on that policy for a
decade. Legislative correction of such a perverse result
appears warranted.
REGISTERED SUPPORT / OPPOSITION :
Support
SB 1177
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San Francisco District Attorney's Office (Sponsor)
California District Attorneys Association
California Labor Federation
Glendale City Employees Association
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 Received.
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086