Businesses protest Gov. Brown’s fee hike

Red tapeMarch 15, 2013

By Dave Roberts

“Constantly expanding the coercive power of government by adding each year so many minute prescriptions to our already detailed and turgid legal system overshadows other aspects of public service.”

— Gov. Jerry Brown, State of the State Address, Jan. 24, 2013

Despite Gov. Jerry Brown’s admonition in his State of the State speech against the constant expansion of the coercive power of government, his budget proposes a 42 percent funding increase for state oversight and enforcement of laws regulating businesses.

Brown’s budget would increase the California Department of Industrial Relations budget to $586 million from last year’s estimated $412 million. The department enforces the thousands of pages of regulations on every workplace in California.

The regulations are quite comprehensive. For example, if a lactating employee feels she’s not being given enough break time to express her breast milk while at work, as provided for in Labor Code section 1030, she can file a claim with the DIR Division of Labor Standards Enforcement’s nearest Bureau of Field Enforcement. The DLSE will send out someone to do an “inspection,” according to a DIR FAQ — although it doesn’t specify exactly what the inspector will be inspecting. The employer could be hit with a $100 fine for each lactation violation.

Unfortunately, the DIR employment enforcers don’t always follow the employment law themselves. A state whistleblowers audit in August 2011 found that an official and a supervisor at a district DIR office “failed to monitor adequately the time reporting of four subordinate employees from July 2007 through June 2009.”

The DIR is one of the longer-lived California bureaucracies, having been established in 1927. Its mission, as stated on its website, “is to improve working conditions for California’s wage earners, and to advance opportunities for profitable employment in California.”

But, looking at the vast array of employment areas the DIR is in charge of — wages, hours and breaks, overtime, retaliation, workplace safety and health, medical care and other benefits for injured workers, and apprenticeship training programs — it’s not hard to imagine that it is making many California employers somewhat less profitable.

Boards and commissions

Along with DIR’s nearly 2,800 employees, it has six boards and commissions providing oversight and enforcement: Commission on Health and Safety and Workers’ Compensation, Industrial Welfare Commission, Occupational Safety and Health Appeals Board, Occupational Safety and Health Standards Board, Office of Self Insurance Plans and the Workers’ Compensation Appeals Board.

DIR’s website describes the department in heroic terms:

“Whether adjudicating a wage claim for an employee who was dismissed and not paid final wages, inspecting a workplace for unsafe chemical exposure, advising employers on ergonomics, tracing the history of an industrial accident, establishing an apprenticeship for child care workers, or advising an injured worker how to apply for workers’ compensation, it’s all in a day’s work.”

This year the department’s actions against shady employers include:

* March 13 — citations totaling nearly $505,000 were issued to three restaurants for minimum wage, overtime and rest break violations.

* March 11 — a lawsuit was filed against a car wash owner, seeking more than $279,000 in unpaid wages, penalties and damages.

* Jan. 30 — 25 citations were issued against Chevron USA, with proposed penalties totaling nearly $1 million, for state safety standard violations related to the August 6, 2012 fire at Chevron’s Richmond refinery.

* Jan. 28 — citations totaling more than $1 million were issued to a warehouse and distribution company for overtime violations and failure to provide a required 30-minute meal period to employees.

* Jan. 24 — a heating and air contractor was ordered to pay $824,570 in wages and $114,300 in fines for failure to pay 10 employees the proper wage.

Fee increases

Last week, the two Democrats on a Senate Budget subcommittee (the Republican member was absent) approved Brown’s multifaceted budget changes for the DIR. Two changes in particular are of concern to the California Chamber of Commerce:

* Elimination of the July 1, 2013 sunset date for employer contributions to the DIR’s Occupational Safety and Health Fund and the Labor Enforcement and Compliance Fund.

* Increasing the annual revenue caps for the OSHF from $52 million to $57 million and for the LECF from $37 million to $46 million.

The Chamber and more than a dozen business trade associations wrote a letter to the subcommittee asking that these budget changes be dropped. The letter reads:

“The language in the [budget change proposal] basically allows the Legislature to adjust these caps each year, and therefore the caps are essentially artificial. The proposed increases in the annual budget of these Divisions for 2013-2014 and the ability for annual increases thereafter will directly increase employer assessments each year, thereby raising the cost for California employers to continue to do business.

“This annual increase will be even more dramatic for those employers who actually hire more employees, as the amount an employer is assessed is directly based upon the employer’s payroll. We do not believe punishing employers for hiring more employees through higher, unlimited annual assessments is a productive way in which to encourage job creation.”

The business groups also argue:

“[T]here is no justification for the proposed increases in either Division’s budget. Despite the fact that these Divisions are funded by employer assessments, there is no requirement that either Division report to employers with regard to how the money is being utilized. Aside from general, sporadic reports, there is no established accounting requirement or transparency into how the agency is directing the revenue they receive from employer assessments.”

The subcommittee staff report states that the extra funding from businesses is needed in order to offset the state’s General Fund revenue for these programs that is being redirected elsewhere.

General Fund

The Chamber counters that, in several years with an improving economy, the General Fund may have enough money to support the DIR programs. The Chamber asks that a new sunset date of 2017 be set for the business assessment.

“We also believe that the elimination or extension of the sunset date should be approved by two-thirds of the Legislature, as according to the definition in Article IIIA, Section 3 of the California Constitution, this ongoing assessment is a tax on employers as the annual adjustment in either divisions’ budget is not limited to the reasonable and necessary costs of the agency,” the letter states. “Moreover, both divisions provide a general public benefit, not just a benefit to the employers who pay the assessment.”

The Legislative Analyst’s Office is also concerned about the LECF fee, writing in a report, “The Governor is proposing to backfill funding for prevailing wage enforcement, which affects a small subset of the state’s employers, with a general fee on all employers (the LECF fee). In this case, there appears to be an insufficient nexus between fee payer and the activities proposed to be funded by the fee to support the proposed backfill mechanism on policy grounds.”

An Assembly Budget subcommittee, which had scheduled the budget proposal for this week, has instead postponed action, probably until sometime in April, according to a Chamber representative.

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