BILL NUMBER: AB 2770INTRODUCED BILL TEXT INTRODUCED BY Committee on Labor and Employment (Monning (Chair), Bill Berryhill (Vice Chair), Eng, Furutani, Ma, and Portantino) MARCH 1, 2010 An act to add Section 559 to the Labor Code, relating to employment. LEGISLATIVE COUNSEL'S DIGEST AB 2770, as introduced, Committee on Labor and Employment. Employee wages and working hours: violators. Existing law requires private employers to perform certain activities with regard to employee wages, hours, and working conditions. This bill would require the Labor Commissioner or his or her designee from the Labor and Workforce Development Agency, in consultation with the Franchise Tax Board and the Economic and Employment Enforcement Coalition (EEEC), to develop and implement a set of standards that, if met by an employer, would trigger a recommendation for an audit or investigation by appropriate state tax authorities of employers in violation of statutes relating to employee wages, hours, and working conditions. After July 1, 2011, this bill would require the Labor Commissioner or the EEEC to take specified actions to facilitate audits and investigations of employers who meet the standards required by this bill. This bill also would state findings and declarations relating to the underground economy. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares all of the following: (1) Despite many targeted enforcement efforts in recent years, including the creation of the Economic and Employment Enforcement Coalition, evidence indicates that the underground economy in California is flourishing. (2) According to the Employment Development Department's analysis of findings of the Internal Revenue Service, the underground economy in California is estimated to be between $60 billion and $140 billion each year. (3) Employers operating in the underground economy hurt everyone; the state loses billions of dollars each year in tax revenues, workers are forced to go without basic employment protections, and law-abiding businesses are confronted with unfair competition from scofflaw competitors. (4) According to the Franchise Tax Board and the State Board of Equalization, an average of $8.5 billion in owed corporate, personal, and sales and use taxes goes uncollected in California each year, with unreported and underreported economic activity responsible for the vast majority of that total. (5) As the state faces unprecedented budget shortfalls, rigorous enforcement of existing state tax laws should be a top priority. (6) It is therefore in the public interest to establish a coordinated approach to enforcement in the underground economy, which would include a nexus between the state's enforcement of labor and tax laws. (b) It is the intent of the Legislature in enacting this act to target those employers that operate in the underground economy in flagrant violation of law, and not employers that commit minor or inadvertent violations of existing law. SEC. 2. Section 559 is added to the Labor Code, to read: 559. (a) The Labor Commissioner or his or her designee from the Labor and Workforce Development Agency, in consultation with the Franchise Tax Board and the Economic and Employment Enforcement Coalition (EEEC), shall, by July 1, 2011, develop and implement an appropriate set of standards that, if met by an employer, will trigger a recommendation for an audit or investigation by appropriate state tax authorities of employers in violation of this chapter, Chapter 1 (commencing with Section 200) of Part 1, or Chapter 1 (commencing with Section 1171) of Part 4. The set of standards shall take into account, among other things, the severity and number of violations committed by an employer. (b) After July 1, 2011, the Labor Commissioner or the EEEC, whichever of the two has authority over the investigation through which it was discovered that the standards developed in subdivision (a) have been met, shall take all of the following actions with respect to an employer who has met those standards: (1) Notify the appropriate state tax authorities each time the set of standards is met by an employer. (2) Provide the appropriate state tax authorities with the name of the employer and all relevant and necessary information regarding the violations. (3) Make a recommendation to the appropriate state tax authorities that the employer be audited or investigated.