2008 Annual Report of the
Unlawfully Uninsured Employer Enforcement Program
Labor Code Section 90.3(d)
The Division of Labor Standards Enforcement (DLSE), through its Bureau of Field Enforcement Unit (Bureau), is charged with
enforcing laws requiring employers in the state of California to secure the coverage of workers’ compensation insurance for any
and all employees. In furtherance of this, Labor Code §90.3(b) requires the Labor Commissioner to maintain a program designed
to systematically identify potentially unlawfully uninsured employers through data matching efforts involving the Uninsured
Employers’ Benefits Trust Fund (UEBTF), the Employment Development Department (EDD), and the Workers’ Compensation
Insurance Rating Bureau (WCIRB). Labor Code section 90.3(d) requires the Labor Commissioner to report annually to the
Legislature concerning the effectiveness of this program.
Background
Assembly Bill (AB) 749 (Chapter 6, Statutes of 2002) added Labor Code section 90.3, mandating that the Labor Commissioner
establish and maintain a targeted unlawfully uninsured employer enforcement program. Effective January 1, 2008, SB 869
(Chapter 662, Statutes of 2007) created a funding mechanism for implementation of the unlawfully uninsured employer
enforcement program, and additionally modified the data reporting relationships between the partner agencies in support of the
program. In implementing SB 869, the various agencies immediately worked to establish a coordinated system of data collection
which includes development of detailed processes for the identification of employers, transmission and sharing of information,
verification of information including notification to employers and cross-referencing of data, and inspection and enforcement
against uninsured employers.
Program Results
In order to implement the systematic unlawfully uninsured employer enforcement program, a novel data collection system was
established. Through the new process, each quarter DLSE receives from EDD a randomly-selected list of 500 employers from
EDD’s database of reporting employers. All 500 employers for the represented quarter are screened through the WCIRB for
evidence of insurance coverage.
DLSE initially received data in May 2008, reflecting employer information from records for the fourth quarter of 2007 (October –
December 2007). Because the implementation of SB 869 is still in its early stages and there is a delay in the data reporting, this
report reflects information available as of January 27, 2009. However, some investigations based on data obtained during the
prior three quarters are ongoing. The following tables summarize results of this program.
TABLE 1
Employers identified from records of EDD that were screened for matching records of insurance coverage or self-insurance.
1,500
Employers identified from records of EDD that were matched to the records of insurance coverage or self-insurance. 949
Employers identified from records of EDD that were notified that there was no record of their insurance coverage. 551
The number of employers responding to contact for verification. (See Table 3 for nature of responses.) 279
Inquiries returned by the post office as undeliverable. 33
Employers responding who verified they had workers’ compensation insurance. 71
WCIRB did not have sufficient database information on the business to respond. 27
Employers acknowledging lack of workers’ compensation insurance. 138
Employers investigated. 551
Number of citations issued per Labor Code section 3722(a). 123
Number of citations issued per Labor Code section 3722(b). 33
Amount of workers’ compensation penalties assessed. $484,489
Amount of workers’ compensation penalties collected. $151,783
* Amount of citations administratively dismissed. <$76,000>
DLSE provided a list to the WCIRB of 71 employers who, during the course of DLSE’s investigation for the first two quarters of
reported data, were able to provide proof of insurance coverage for the period of time in which the WCIRB indicated there was no
coverage. The following table summarizes WCIRB’s responses for these employers:
TABLE 2
WCIRB found coverage under another name and/or address provided by DLSE in the follow-up lists. 29
Coverage was found by DLSE, but the policy either incepted or was not received by the WCIRB until after the date of submission of
the original quarterly lists. 10
Employer was not required to have workers’ compensation insurance (i.e., employer was self-insured, had no employees subject
to workers’ compensation requirements, or was otherwise legally not insured). 7
DLSE reported finding coverage, but did not provide sufficient coverage information in the follow-up lists and the WCIRB could not
confirm coverage. 25
The following table summarizes the nature of responses received from employers in accounting for a lack of workers’
compensation coverage:
TABLE 3
Company out of business 52
No employees 49
Corporate officers only 30
Self-Insured 4
As shown, DLSE has undertaken significant efforts to implement the systematic unlawfully uninsured employer enforcement
program, and those efforts have yielded positive results in DLSE’s continued work in combating the underground economy. DLSE
will continue to refine the efficiency and effectiveness of this program for the benefit of both employees and employers.
Respectfully Submitted,
Angela Bradstreet
State Labor Commissioner
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