OLR Bill Analysis
AN ACT CONCERNING THE RECOUPMENT OF STATE COSTS ATTRIBUTABLE TO LOW WAGE EMPLOYERS.
Starting January 1, 2016, this bill establishes a quarterly low wage employer fee to be imposed upon (1) certain employers with at least 500 employees and (2) franchisors whose franchisees collectively employ at least 500 employees. These employers and franchisors (“covered employers”) must pay a $1- per- work-hour fee for each person who was (1) on the employer's payroll, or the payroll of one of the franchisor's franchisees, for 90 days prior to the most recently completed calendar quarter and (2) paid $15 per hour or less in wages by the employer or franchisee. The labor commissioner must collect the fees within 60 days after the end of the quarter for which they are assessed (presumably by the labor commissioner). The bill also establishes a complaint process for covered employers.
The bill establishes a human services support account as a separate, nonlapsing account within the General Fund. Under the bill, the labor commissioner deposits funds collected from the low wage employer fee into this account, which is allocated for specified purposes to the Department of Social Services (DSS), the Department of Developmental Services (DDS), and the Office of Early Childhood (OEC).
The bill also establishes the Connecticut Low Wage Employer Advisory Board to advise various departments on issues relating to, among other things, implementation of the low wage employer fee, public assistance use among working state residents, and improvements to the quality of public assistance programs affecting such residents.
EFFECTIVE DATE: Upon passage
LOW WAGE EMPLOYER FEE
Under the bill, covered employers must pay a low wage employer fee, which the bill defines as a quarterly fee of $1 per hour worked during the assessed quarter by each person who was (1) on the employer's or franchisee's payroll for the last 90 days of the most recently completed calendar quarter and (2) paid wages by the employer or franchisee that were $15 per hour or less. Employers do not have to pay the fee for employees at parks, camps, or resorts open less than six months a year.
Starting October 1, 2015, the labor commissioner must adopt regulations on determining and collecting low wage employer fees, including establishing reasonable penalties or remedies for (1) failure to file timely reports and (2) delinquent or unpaid fees.
The low wage employer fee does not apply to employees whose pay was established by a collective bargaining agreement before the bill's effective date.
An employer subject to the bill's provisions is any person, firm, business, educational institution, corporation, limited liability company, or other entity that directly employed at least 500 employees in the state in any one of the previous year's quarters. It does not include any private nonprofit entity, the state, or the state's instrumentalities and political subdivisions. The determination of whether an employer is subject to the fees must be made annually on January 1, based on the quarterly wage information employers submit to the labor commissioner for unemployment tax purposes.
The bill subjects franchisors to the bill's provisions if their franchisees collectively employed at least 500 employees in the state in any one of the previous year's quarters. A franchisor is an entity that grants a franchise to another entity. A franchise includes the authority to use a trademark, trade name, service mark, or other identifying symbol or name under a franchise.
By January 1, 2016, and annually thereafter, the bill requires employers submitting wage reports for unemployment tax purposes to indicate, on a form and in a manner determined by the labor commissioner, if they are a franchisee, and if so, their franchisor's contact information and any other information the commissioner requests. The determination of whether a franchisor is subject to the bill's provisions must be made annually on January 15 based on these responses.
In general, franchisors are not considered the employers of the employees who work in a franchise. Instead, because the franchisee who owns the franchise controls the hiring, firing, wage, and scheduling decisions for these workers, the franchisee is typically considered their employer under wage, unemployment, workers' compensation, and other labor laws. Thus, it is unclear whether a franchisor could be held financially liable for wage and hour decisions over which it has no control. It is also unclear whether the state can enforce and collect a fee imposed on an entity that is not located within the state (e.g., a franchisor that does not have a corporate headquarters in the state).
USE OF FUNDS
Human Services Support Account
The bill creates a human services support account and requires the labor commissioner, through the state treasurer, to deposit funds collected from the low wage employer fee into the account. The bill allocates funds in the account to:
1. DSS and DDS to support and improve the quality of state-supported, consumer-directed services for elderly and disabled persons and
2. OEC to increase access to, support, and improve the quality of (a) school readiness programs, (b) the Care 4 Kids program, (c) child development centers, (d) Head Start, (e) Early Head Start, or (f) other OEC programs providing child care and early learning opportunities for low wage workers' children.
To improve the quality of services in any of these DSS, DDS, or OEC programs, the bill allows use of the revenue from this account to pay for recruiting, retaining, and offering professional development to a qualified workforce.
The bill also permits the labor commissioner to use funds collected through the low wage employer fee to administer and enforce the fee requirement.
The bill allows any aggrieved covered employer to file a complaint with the labor commissioner about her determination of fees. When she receives a complaint, the bill requires her to investigate it and allows her to conduct a hearing, in accordance with the state's Uniform Administrative Procedure Act.
The bill allows the labor commissioner to request that the attorney general investigate any violation of the requirement to pay the low wage employer fee. Under the bill, information obtained during such an investigation is exempt from the state's Freedom of Information Act. If the attorney general finds that a covered employer has violated the bill's provisions, he can sue the employer in Hartford Superior Court.
Establishment and Duties
The bill establishes the Connecticut Low Wage Employer Advisory Board, within the DOL for administrative purposes only, to advise the labor commissioner, DSS, DDS, and OEC generally on matters related to (1) the low wage employer fee implementation, (2) public assistance use among working residents of the state, (3) improvements to the quality of public assistance programs affecting these residents, (4) wages and working conditions for the workforce delivering services to low wage working families, and (5) large businesses' reliance on state-funded public assistance programs. The board must also:
1. advise the Labor Department (DOL) and other agencies as needed on matters related to implementing the low wage employer fee, the complaint process, or wage information collection;
2. study and monitor causes and effects of large businesses paying low wages to state residents, including the impact of such practices on (a) workers' need for public assistance, (b) benefits employers receive from public assistance provided to the state workforce, and (c) solutions to associated problems;
3. consider, suggest, and review legislative and agency proposals and actions;
4. foster communication between working state residents who provide or receive public assistance and employers and state agencies to improve the quality of state public assistance programs serving lower-income residents; and
5. advise the labor commissioner and other interested state agencies or officials on (a) policies and procedures related to public assistance use among lower-income working residents and (b) public assistance programs' impact on workforce quality and stability.
Under the bill, the advisory board may form working groups to solicit feedback from stakeholders as necessary to fulfill its duties.
The bill requires the advisory board to annually report its findings and recommendations every December 1 to the DOL, DSS, and OEC commissioners. The board's findings must also be made available to the public and the Labor, Human Services, and Education committees.
Under the bill, the 13-member board consists of (1) the labor commissioner, or her designee; (2) the Office of Policy and Management secretary, or his designee; and (3) 11 appointed members. The board's members have initial terms of four years. Though the bill requires appointing authorities to appoint members by July 31, 2015, it also requires the board to meet within 40 days of passage of the bill, which could precede that date. The appointed members are:
1. (a) one expert on issues facing low wage workers, (b) one expert on the large business community's labor force needs, (c) one expert on the small business community's labor force needs, (d) one recipient of consumer-directed Medicaid services, and (e) one person enrolled in a state child care program, all appointed by the governor;
2. one representative of an organization whose principal purpose is advocacy for services funded by consumer-directed Medicaid programs, appointed by the Senate president pro tempore;
3. one representative of an organization whose principal purpose is advocacy for services funded by state child care programs, appointed by the House speaker;
4. one representative of organized labor, representing workers who provide services funded by consumer-directed Medicaid programs, appointed by the Senate majority leader;
5. one representative of organized labor representing workers who provide child care services funded by state child care programs, appointed by the House majority leader;
6. one person experienced in large business community labor force needs, appointed by the Senate minority leader; and
7. one person experienced small business community labor force needs, appointed by the House minority leader.
Under the bill, following the expiration of their initial term, all appointed members serve three-year terms. Appointing authorities may reappoint previously appointed members and must fill vacancies within 30 days.
Board Member Requirements
Under the bill, each board member has one vote, and a majority of the board constitutes a quorum for the board's business transaction, exercise of powers, or performance of duties. The bill requires board members to (1) elect two chairpersons at the first meeting; (2) meet quarterly; and (3) serve without compensation. They must be reimbursed, however, within available appropriations, for necessary expenses under standard state employee travel reimbursement policy.
The bill requires board members, within ten days of appointment, to take an oath of office to (1) diligently and honestly administer the board affairs and (2) not knowingly violate applicable legal provisions or willingly permit them to be violated. The bill requires the chairperson of the board to administer the oath.
HB 6791, favorably reported by the Labor and Public Employees Committee, applies a similar low wage employer fee to covered employers of at least 250 employees.
Human Services Committee
Joint Favorable Substitute