Wage Law

California Governor Arnold Schwarzenegger has vetoed AB 2770, which would have created a pilot program to investigate employment and payment practices within the swimming pool and spa construction industry and develop and implement a set of criteria that, if met by an employer, would trigger a recommendation for an audit or investigation by the appropriate state tax authorities.

AB 2770 would, until January 1, 2017, establish a pilot program to investigate employment and payment practices within the swimming pool and spa construction industry. The bill would require the Employment Development Department, in consultation with the Franchise Tax Board, the Department of Justice, the Department of Insurance, the Labor and Workforce Development Agency, and industry representatives, to develop and implement a set of criteria that, if met by an employer, would trigger a recommendation for an audit or investigation by appropriate state tax authorities to determine if the employer is in violation of statutes relating to employee wages, hours, and working conditions. After July 1, 2011, it would require the Employment Development Department to take specified actions with respect to an employer when application of the set of criteria indicates that a violation of the statutes described above may have occurred. This bill also would state findings and declarations relating to the underground economy and the swimming pool and spa construction industry.

From our own experience, we can state with a high degree of confidence that contractors in the pool and spa industry are among the dirtiest of all businesses in the state. So dirty, in fact, that the legislature imposes stricter requirements upon them for their consumer contracts than any other class of contractor must meet, and the CSLB requires them to post larger license bonds that other classes of contractors. Nonetheless, the Governor didn't like the bill.

The Governor's veto message reads:

To the Members of the California State Assembly:

I am returning Assembly Bill 2770 without my signature.

This bill would 1) create a pilot program to investigate employment and payment practices within the swimming pool and spa construction industry; and, 2) require the Employment Development Department, in consultation with the Franchise Tax Board, the Department of Justice, the Department of Insurance, the Labor and Workforce Development Agency, and industry representatives, to develop and implement a set of criteria that, if met by an employer, would trigger a recommendation for an audit or investigation by the appropriate state tax authorities.

My Administration has been committed to vigorously enforcing the laws of this state and maximizing resources to combat the underground economy. As shown in creation of the Economic and Employment Enforcement Coalition, I support implementing targeted systems of coordination. However, as I have repeatedly indicated, legislating that coordination and the adoption of protocols or standards for that is unnecessary. If existing laws impeded this coordination, it would be appropriate to alter those. However, simply statutorily instructing the respective enforcement agencies to in essence work together does not assist them in a substantive and practical way. Moreover, I also note that this bill fails to prescribe what it is intended to achieve. Rather than creating a trigger for a tax audit when labor laws are found to have been violated as the bill intends, this bill instructs tax authorities to recommend and conduct audits or investigations to determine specifically whether labor laws, rather than tax laws, have been violated. Having tax authorities audit and investigate for potential labor law violations is inconsistent with their expertise, and instead is a function of the Division of Labor Standards Enforcement.

For these reasons, I am returning this bill without my signature.

This was one of the longest veto messages of the session.