The failure to secure the payment of compensation as required by the workers' compensation law by one who knew, or because of his or her knowledge or experience should be reasonably expected to know, of the obligation to secure the payment of compensation, is a misdemeanor punishable by imprisonment in the County jail for up to one year, or a fine of up to ten-thousand dollars ($10,000), or both a fine and imprisonment.
Labor Code section 3700.5 was amended effective March 6, 2005 to provide:
(a) The failure to secure the payment of compensation as required by this article by one who knew, or because of his or her knowledge or experience should be reasonably expected to have known, of the obligation to secure the payment of compensation, is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to double the amount of premium, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time compensation was not secured, but not less than ten thousand dollars ($10,000), or by both that imprisonment and fine.
(b) A second or subsequent conviction shall be punished by imprisonment in the county jail for a period not to exceed one year, by a fine of triple the amount of premium, or by both that imprisonment and fine, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time payment was not secured, but not less than fifty thousand dollars ($50,000).
(c) Upon a first conviction of a person under this section, the person may be charged the costs of investigation at the discretion of the court. Upon a subsequent conviction, the person shall be charged the costs of investigation in addition to any other penalties pursuant to subdivision (b). The costs of investigation shall be paid only after the payment of any benefits that may be owed to injured workers, any reimbursement that may be owed to the director for benefits provided to the injured worker pursuant to Section 3717, and any other penalty assessments that may be owed.
The Director of Industrial Relations, who enforces the laws relating to uninsurance, may assess a penalty of up to $100,000 pursuant to Labor Code section 3722.
Where an employer has failed to secure the payment of compensation, the Director or designated agents must issue a stop order prohibiting the use of the employee labor by such employer until the employer's compliance with the Code. Any employee so affected by such work stoppage must be paid by the employer for such time lost, not exceeding 10 days, pending compliance by the employer. (Lab. Code sec. 3710.1.)
Failure of an employer to observe a Stop Order issued pursuant to Labor Code section 3710.1 is a misdemeanor and makes mandatory on the tribunal before whom the charge of violation of such stop order is tried the imposition of a sentence of imprisonment in the county jail for not less than 60 days and a fine of not less than $10,000. Fines must be paid into the State Treasury to the credit of the Uninsured Employers Fund (UEF) . The Director or designated agents may also obtain injunctive and other relief from the courts to carry out the purposes of section 3710.1. (Lab. Code sec. 3710.2.)
In Woodline Furniture Mfg. Co. v. Department of Industrial Relations (1994) 59 Cal.Comp.Cases 271, (Published), the Court of Appeal, Second District, upheld a penalty assessment of $100,000 (maximum) because of the failure of the employer to have workers' compensation insurance coverage on its 131 employees employees. The Court stated, in part:
Fourth, the amount of the penalty imposed in this instance is roughly equal to the amount Woodline would have paid for coverage during the six months it was uninsured. When the State Fund policy issued, the estimated annual premium was over $195,000-which means a fine for half that amount is perfect justice. (See also §§3715, 3716, 3722, subd. (a) [claims by employee injured while working for an uninsured employer are paid, in most instances, by the Uninsured Employers Fund and the $100,000 penalty imposed on Woodline was or will be deposited into that Fund].)....
When the payment of compensation has been unreasonably delayed or refused prior to the issuance of an award, and the director has provided discretionary compensation pursuant to Labor Code section 4903.3, the Appeals Board will award to the director a penalty to be paid by the employer in the amount of 10 percent of the compensation so provided by the director. Such penalty is in addition to the penalty imposed by Labor Code section 5814. The question of delay and the reasonableness of the cause therefor shall be determined by the Appeals Board in accordance with the facts. (Lab. Code sec. 5814.1.)
The securing of the payment of compensation in a way provided in the Code is essential to the functioning of the expressly declared social public policy of this state in the matter of workers' compensation; and the conduct or operation of any business or undertaking without full compensation security, in continuing violation of such social policy, must be subject to imposition of business strictures and monetary penalties by the Director of Industrial Relations, or his designated agents, including, but not limited to, resort to the Superior Court of any county in which all or some part of such business is being thus unlawfully conducted or operated, for carrying out the intent of this article.
In a proceeding before the Superior Court in matters concerning noninsurance, no filing fee will be charged to the plaintiff; nor may any charge or cost be imposed for any act or service required of or done by any state or county officer or employee in connection with such proceeding. No bond will be required as a prerequisite to the granting of a restraining order. If the Court or the Judge before whom the order to show cause in such proceeding shall be made returnable, shall find that the defendant is conducting or operating a business or undertaking without the full compensation security required, the Court or Judge must forthwith, and without continuance, issue an order restraining the future or further conduct and operation of said business or undertaking so long as such violation of social public policy shall continue.
Such action may be prosecuted by the Attorney General of California. The district attorney of the county in which a suit is brought, the city attorney of any city in which such a business or undertaking is being operated or conducted without full compensation security, or any attorney possessing civil service status who is an employee of the Department of Industrial Relations who may be designated by the Director for such purpose. No finding made in the course of any such action will be binding on the Appeals Board in any subsequent proceeding before it for benefits under the Code. (Lab. Code sec. 3712.)
Employers of domestic employees covered as of January 1, 1977, are exempt from the posting of their insurance carrier's name, and are not subject to the penalties discussed above for failure to secure the payment of compensation. (Lab. Code sec. 3354.) In addition to the penalties discussed above for failure to secure the payment of compensation, an employee's award may be increased 10 percent if the employer is willfully uninsured. (Lab. Code sec. 4554.)
Further, the employer may be ordered to pay a reasonable attorney's fee. (Lab. Code sec. 4555.) There is no requirement in the Labor Code that the failure to secure compensation be willful as a condition precedent to assessing an attorney's fee against the employer.
The Appeals Board does not have personal jurisdiction over an uninsured employer unless there has been personal service. (State Compensation Insurance Fund v. W.C.A.B. (Kroemer) (1983) 48 Cal. Comp. Cases 825 (Writ Denied).)
An employer is uninsured if it does not carry liability insurance to pay compensation or secure a Certificate or Consent to self-insure from the Director of Industrial Relations.
If upon the filing of a claim for compensation, the Board finds that any employer has not secured the payment of compensation, the Board must so notify the Director of Industrial Relations and the employer by mail.
The employer must pay specified dollar penalties for each employee in the employment of such employer on the date of injury of an employee subject to the claim filed against such illegally uninsured employer. The maximum amount of such penalty is ten thousand dollars ($10,000) per employee, with a maximum penalty assessment of $100,000. The number of employees on the date considered herein must be established by verified statement of the employer or by such other information as the Director may obtain. Payment must be transmitted to the Director for deposit in the State Treasury to the credit of the UEF The Board may provide for a summary hearing on the sole issue of compensation coverage.
Labor Code section 3722 provides:
(a) At the time the stop order is issued and served pursuant to Section 3710.1, the director shall also issue and serve a penalty assessment order requiring the uninsured employer to pay to the director, for deposit in the State Treasury to the credit of the Uninsured Employers Fund, the sum of one thousand dollars ($1,000) per employee employed at the time the order is issued and served, as an additional penalty for being uninsured at that time.
(b) At any time that the director determines that an employer has been uninsured for a period in excess of one week during the calendar year preceding the determination, the director may issue and serve a penalty assessment order requiring the uninsured employer to pay to the director, for deposit in the State Treasury to the credit of the Uninsured Employers Fund, the greater of (1) twice the amount the employer would have paid in workers' compensation premiums during the period the employer was uninsured, determined according to subdivision (c), or (2) the sum of one thousand dollars ($1,000) per employee employed during the period the employer was uninsured. A penalty assessment issued and served by the director pursuant to this subdivision shall be in lieu of, and not in addition to, any other penalty issued and served by the director pursuant to subdivision (a).
(c) If the employer is currently insured, or becomes insured during the period during which the penalty under subdivision (b) is being determined, the amount an employer would have paid in workers' compensation premiums shall be calculated by prorating the current premium for the number of weeks the employer was uninsured. If the employer is uninsured at the time the penalty under subdivision (b) is being determined, the amount an employer would have paid in workers' compensation premiums shall be calculated by applying the weekly premium per employee calculated according to subdivision (d) of Section 11734 of the Insurance Code to the number of weeks the employer was uninsured. Each employee of the uninsured employer shall be assumed to be assigned to the governing classification for that employer as determined by the director after consultation with the Insurance Commissioner. If the employer contends that the assignment of the governing classification is incorrect, or that any employee should be assigned to a different classification, the employer has the burden to prove that the different classification should be utilized.
(d) If upon the filing of a claim for compensation under this division the Workers' Compensation Appeals Board finds that any employer has not secured the payment of compensation as required by this division and finds the claim either noncompensable or compensable, the appeals board shall mail a copy of their findings to the uninsured employer and the director, together with a direction to the uninsured employer to file a verified statement pursuant to subdivision (e).
After the time for any appeal has expired and the adjudication of the claim has become final, the uninsured employer shall be assessed and pay as a penalty either of the following:
(1) In noncompensable cases, two thousand dollars ($2,000) per each employee employed at the time of the claimed injury.
(2) In compensable cases, ten thousand dollars ($10,000) per each employee employed on the date of the injury.
(e) In order to establish the number of employees the uninsured employer had on the date of the claimed injury in noncompensable cases and on the date of injury in compensable cases, the employer shall submit to the director within 10 days after service of findings, awards, and orders of the Workers' Compensation Appeals Board a verified statement of the number of employees in his or her employ on the date of injury. If the employer fails to submit to the director this verified statement or if the director disputes the accuracy of the number of employees reported by the employer, the director shall use any information regarding the number of employees as the director may have or otherwise obtains.
(f) Except for penalties assessed under subdivision (b), the maximum amount of penalties which may be assessed pursuant to this section is one hundred thousand dollars ($100,000). Payment shall be transmitted to the director for deposit in the State Treasury to the credit of the Uninsured Employers Fund.
(g) (1) The Workers' Compensation Appeals Board may provide for a summary hearing on the sole issue of compensation coverage to effect the provisions of this section.
(2) In the event a claim is settled by the director pursuant to subdivision (e) of Section 3715 by means of a compromise and release or stipulations with request for award, the appeals board may also provide for a summary hearing on the issue of compensability.
In Leo's Associates v. Dept. of Industrial Relations, et al. (2004) 69 Cal. Comp. Cases 697, (Published), the Court of Appeal, Second District, held that a penalty assessment against an employer for failure to secure workers' compensation insurance would not be set aside when coverage was reinstated retroactively to include the date of the penalty assessment, observing that they could not rewrite history to establish that a lapse had not occurred and invalidate the penalty assessment.
The Director may withdraw a stop order or a penalty assessment order where an investigation reveals the employer has secured the payment of compensation as required by Labor Code section 3700 on the date and at the time of service of such order.
The director may withdraw a penalty assessment where an investigation discloses that the employer was insured on the date and at the time of an injury or claimed injury or where an insured employer responded in writing to a request to forward the status of his workers' compensation coverage within the time prescribed. (Lab. Code sec. 3727.1.)
However, when an employer obtains workers' compensation insurance from an insurer who is not authorized to write compensation insurance in California and a penalty is assessed against the employer pursuant to Labor Code section 3722(a), for failure to obtain insurance from an authorized insurer, the Division of Labor Standards Enforcement does not have discretion under Labor Code section 3727.1 to withdraw the penalty assessment. Starving Students, Inc. v. Department of Industrial Relations, et al. (2005) 70 Cal. Comp. Cases 30, (Published).
All persons who are a parent, as defined in Corporations Code section 175(b), of the corporation or who are substantial shareholders of the corporation or its parent may be jointly and severally liable with the corporation, for damages, if the Appeals Board finds that the corporation is the employer of an injured employee and the corporation has not secured the payment of compensation as required by the Code. (Lab. Code sec. 3717.)
A substantial shareholder means a shareholder who owns at least 15 percent of the total value of all classes of stock, or, if no stock has been issued, who owns at least 15 percent of the beneficial interests in the corporation. (Id.)
If substantial shareholders cannot be found with reasonable diligence they may be served by serving the corporation. The corporation must notify the shareholder of the service. (Lab. Code sec. 3717.1.)
The Appeals Board, upon request of the Director, must make findings of whether persons are substantial shareholders or parents but the Director has the power to proceed against the substantial shareholders and parents without such findings. (Lab. Code sec. 3717.2.)
Absent a request by the Director, a trial Judge does not have the power to find persons to be "substantial shareholders." (Kimball v. W.C.A.B. (Turley) (1992) 57 Cal.Comp.Cases 467 (Unpublished).) Any person aggrieved by a finding of the Director that he or she was prima facie a parent or substantial shareholder may have a hearing before a hearing officer. If a party is aggrieved by a hearing officer's finding, he or she may apply, within 20 days, for a writ of mandate to the Superior Court. (Lab. Code sec.3720.1.)
The Director of the Fund may bring a civil action to recover damages from any person or entity, whose tortious act or omission proximately caused an injury or death of an employee for whom the Fund has provided compensation. (Lab. Code sec. 3732.)
Any settlement or judgment obtained by an employee, his or her guardian, conservator, personal representative, estate survivors, or heirs against a third party who may be liable for causing the injury or death of the employee is subject to the Director's claim for damages. (Id.)
No judgment or settlement in any such action or claim, where the Director has an interest, is satisfied without first giving the Director notice and a reasonable opportunity to perfect and satisfy his or her lien. (Id.)
Prior to March 4, 1972, an injured employee could proceed against an uninsured employer in an action at law for damages in civil Court and also for benefits under the workers' compensation law before the Workers' Compensation Appeals Board.
However, on March 4, 1972, the Uninsured Employers Benefit Trust Fund was established to pay the unpaid uninsured employer's liability to injured workers. See Lab. Code sec. 3716.
If the injured employee inadvertently or mistakenly chooses a remedy that proves to be the wrong remedy, or at least an unfruitful one, he or she may thereafter seek an alternative remedy and is not estopped under the doctrine of election of remedies from doing so. (Felix v. W.C.A.B. (1974) 39 Cal.Comp.Cases 611 (Published).) But, see Ready Transportation v. W.C.A.B. (Duran) (1997) 62 Cal.Comp.Cases 291(Unpublished).
In the event of the failure of an employer to secure the payment of compensation, by securing liability insurance to pay compensation or a certificate to self-insurance from the Director of Industrial Relations, an injured employee, or his or her dependents, may proceed against such employer by filing an application for compensation with the Appeals Board, or by bringing an action at law against such employer for damages as if the workers' compensation law did not apply. (Lab. Code secs. 3700 and 3706.) Any judgment from the civil Court must also include a reasonable attorney's fee. (Lab. Code sec. 3709.)
In Van Blarcom v. W.C.A.B. (1983) 48 Cal.Comp.Cases 221 (Unpublished), the applicant, hereafter referred to as the petitioner, was injured when he fell through the floor of a house on which he was working on December 17, 1977, for his alleged employer, Bryan Gould.
Petitioner filed an application for adjudication of claim before the Workers' Compensation Appeals Board on September 8, 1978. In addition, because petitioner's status as an employee was in question, and because the alleged employer was uninsured, petitioner also filed a civil complaint for personal injuries on December 5, 1978.
Petitioner then requested a regular hearing before the Workers' Compensation Appeals Board. After one continuance, the trial was conducted by a Workers' Compensation Judge on November 7, 1979. At that time, issues were framed, exhibits entered into evidence, and respondent testified as petitioner's first witness. The matter not having been concluded in one half day, it was continued on the regular calendar for an additional half day of trial. The matter was calendered and continued several times because of various attorney calendar conflicts and witnesses' unavailability.
In the meantime, the civil claim was proceeding in the discovery stages and proceeded to arbitration pursuant to California Rules of Court, rule 1600 et seq. On October 21, 1980, petitioner's arbitration claim was denied. Petitioner subsequently requested a Superior Court trial in the arbitration matter, and a trial date was to be set at a March 3, 1982, trial setting conference.
Shortly before the second half of the workers' compensation trial scheduled for April 29, 1981, respondent petitioned for a delay or dismissal of the compensation claim, alleging that, by proceeding to arbitration, petitioner had made an election of remedies. Petitioner contended in opposition to respondent's petition that the arbitration did not constitute a judgment and that, inasmuch as trial had already begun before the Workers' Compensation Appeals Board, it was this forum, if any, that had been elected. The Workers' Compensation Judge dismissed petitioner's case, finding that the arbitration was an election and that petitioner was estopped from further proceedings before the Board. Petitioner filed a Petition for Reconsideration. The Board denied the petition.
The Court of Appeal, First District, in reversing the Board and holding that the petitioner was not estopped to proceed with his workers' compensation claim, stated:
Petitioner challenges the Board's determination that he had made a binding election of remedies by proceeding in arbitration which required dismissal of his workers' compensation claim.
Prior to 1971, where the employer had failed to insure, an employee was not required to elect between a compensation proceeding and an action at law, but might conduct the two proceedings concurrently. (Chakmakjian v. Lowe (1949) 33 Cal.2d 308, 310 [14 Cal. Comp. Cases 15, 201 P.2d 801]; 2 Hanna, California Law of Employee Injuries and Workmen's Compensation (2d ed. 1982) Sec. 2201[a], [c].) In 1971, with the enactment of legislation establishing the Uninsured Employers Fund (see, generally, Lab. Code, Secs. 37163727), the Legislature provided that a proceeding by an employee or dependent against an uninsured employer before the Appeals Board is "in lieu of proceedings against his employer by civil action." (Former Lab. Code, Sec. 3715; Felix v. Workmen's Comp. Appeals Bd. (1974) 41 Cal.App.3d 759, 763 [39 Cal. Comp. Cases 611, 113 Cal.Rptr. 345]; Hanna, supra, Sec. 22.01[c].)
Absent acts giving rise to res judicata, the doctrine of election of remedies is founded upon estoppel. (Felix v. Workmen's Comp. Appeals Bd., supra, at p. 764; 2 Witkin, Cal. Procedure (2d ed. 1970) Actions, Sec. 113, p. 982.) Two of the several necessary elements of estoppel are that the party to be estopped must be apprised of the facts, and that the party raising the estoppel must be prejudiced by the actions of the party to be estopped. (Felix, supra, at p. 764.)
The court in Felix did not specify the exact point at which it might be said a binding election had been made. It observed, however, that "it can be persuasively argued that to protect the adverse party from the harassment and expense of concurrently defending two proceedings to judgment the Legislature intended the election to take place somewhere short of judgment." (Id., at p. 766, fn. 6.)
Here, petitioner's entitlement to the protection of Workers' Compensation Act was uncertain, since respondent disputed the existence of an employment relationship. It was therefore reasonable for petitioner to pursue an alternative remedy. In addition, the record does not show if or how respondent would be prejudiced by permitting petitioner to pursue his workers' compensation remedy. We also note that the record does not indicate the reason for the arbitrator's denial of petitioner's claim. In any event, that decision is not final, for petitioner has sought a trial de novo in superior court. Under these circumstances, we must conclude that a case of estoppel was not made against petitioner and that the Board's decision must therefore be reversed....
If an illegally uninsured employer receives a full release of a claim and a dismissal with prejudice in a personal injury action by an employee, without the approval of the Workers' Compensation Appeals Board, the release does not bar the employee's workers' compensation claim if such a claim was the subject matter of the release. (LeParc Community Association v. W.C.A.B. (2003) 68 Cal.Comp.Cases 1041, (Published).
Actions Against Illegally Uninsured Employers
If an employer fails to secure the payment of compensation by obtaining an insurance policy or securing permission from the state to be self-insured, any injured employee may sue the employer in civil court for damages. Labor Code section 3706 provides in pertinent part:
If any employer fails to secure the payment of compensation, any injured employee or his dependents may bring an action at law against such employer for damages, as if this division did not apply....
In Huffman v. City of Poway (2000) 65 Cal.Comp.Cases 1280, (Published), an employer argued, to no avail, that it was immune from a civil action under Labor Code section 3700 because another entity contended that it extended workers compensation insurance coverage to it even though it did not have an insurance policy or a certificate of self-insurance.
Labor Code section 3707 provides:
The injured employee or his dependents may in such action attach the property of the employer, at any time upon or after the institution of such action, in an amount fixed by the court, to secure the payment of any judgment which is ultimately obtained. The provisions of the Code of Civil Procedure, not inconsistent with this division, shall govern the issuance of, and proceedings upon such attachment.
Labor Code section 3708 provides:
In such action it is presumed that the injury to the employee was a direct result and grew out of the negligence of the employer, and the burden of proof is upon the employer, to rebut the presumption of negligence. It is not a defense to the employer that the employee was guilty of contributory negligence, or assumed the risk of the hazard complained of, or that the injury was caused by the negligence of a fellow servant. No contract or regulation shall restore to the employer any of the foregoing defenses.
This section shall not apply to any employer of an employee, as defined in subdivision (d) of Section 3351, with respect to such employee, but shall apply to employers of employees described in subdivision (b) of Section 3715, with respect to such employees.
The presumption allowed under section 3708 that an applicant's injury occurred from an uninsured negligence does not include a presumption that the applicant's claimed injury arose out of and was sustained in the course of employment.
Ai Zhen Huang brought this lawsuit against her former employers, Brad Hunter and L.A. Haute, for injuries she claimed occurred in the course of her employment at Hunter's residence. L.A. Haute and Hunter did not have workers' compensation insurance, and suit was brought under Labor Code section 3706, which allows an action at law for damages against an uninsured employer. In such an action, Labor Code section 3708 mandates a presumption that the injury to the employee "was a direct result and grew out of the negligence of the employer, and the burden of proof is upon the employer, to rebut the presumption of negligence."
The question presented on this appeal is whether the presumption of negligence in section 3708 includes a presumption that the injury occurred in the course of the worker's employment. We conclude it does not. An employee seeking damages from an uninsured employer has the same burden of proof as an employee seeking workers' compensation benefits: the employee bears the burden of proving her injury was sustained in the course of her employment. Under section 3708, if an injury arising from the employment is shown, it is presumed to have resulted from the employer's negligence, and the employer is required to rebut that presumption to avoid liability. The trial court concluded Huang did not meet her burden to prove her injury arose from her employment, impliedly declining to believe Huang's testimony that she was injured during her employment, and instead crediting other evidence from which it could be inferred her story was not true. Since there was substantial evidence to support the court's conclusion, we are obliged to affirm the judgment in the employer's favor.....
Labor Code section 3708.5 provides:
If an employee brings such an action for damages, the employee shall forthwith give a copy of the complaint to the Uninsured Employers Fund of the action by personal service or certified mail. Proof of such service shall be filed in such action. If a civil action has been initiated against the employer pursuant to Section 3717, the actions shall be consolidated.
Labor Code section 3709 provides:
If, as a result of such action for damages, a judgment is obtained against the employer, any compensation awarded, paid or secured by the employer shall be credited against the judgment. The court shall allow as a first lien against such judgment the amount of compensation paid by the director from the Uninsured Employers Fund pursuant to Section 3716.
Such judgment shall include a reasonable attorney's fee fixed by the court. The director, as administrator of the Uninsured Employer Fund, shall have a first lien against any proceeds of settlement in such action, before or after judgment, in the amount of compensation paid by the director from the Uninsured Employers Fund pursuant to section 3716.
No satisfaction of a judgment in such action, in whole or in part, shall be valid as against the director without giving the director notice and a reasonable opportunity to perfect and satisfy his lien.
Although a reasonable attorney fee may be awarded under Labor Code section 3709, the 10 percent penalty provided in workers' compensation proceeding may not be awarded. In Leung v. Chinese Six Companies (1992) 57 Cal.Comp.Cases 33 (Published), the court in Leung found attorneys fee of $100,000 reasonable where the jury awarded damages of $500,000 for the employee's death.
If an action at law is brought against an employer who has failed to secure the payments of compensation, it is presumed that the injury to the employee was a direct result and grew out of the negligence of the employer. The burden of proof is upon the employer to rebut the presumption of negligence. It is no defense to the employer that the employee was guilty of contributory negligence, or assumed the risk of the hazard complained of, or that the injury was caused by the negligence of a fellow employee. No contract or regulation can restore to the employer any of the foregoing defenses. (Lab. Code sec. 3708.)
The rule requiring a liberal construction of the workers' compensation law in favor of the applicant applies in civil suits as well as in compensation proceedings. (Eckis v. Sea World Corp. (1976) 41 Cal.Comp.Cases 747 (Published).)
If there is no convincing evidence that the employee was not in the course of his or her employment at the time of injury and the injury arose out of the employment, a direct verdict may be warranted. (Leung v. Chinese Six Companies supra, 57 Cal. Comp.Cases 33.)
The doctrine of comparative negligence set forth in Li v. Yellow Cab Company of Calif. (1975) 40 Cal.Comp.Cases 258 (Published), which holds that the extent of liability, is not applicable in actions brought at law against an employer under Labor Code section 3706, which permits such actions for damages where an employer fails to secure the payment of compensation. In such an action, section 3706 provides a presumption that the injury to the employee was a direct result and grew out of the negligence of the employer. In contrast to proceedings before the Workers' Compensation Appeals Board, the employer in a section 3706 case is exonerated by a proven absence of negligence, but the employee's negligence is irrelevant.
Despite Li v. Yellow Cab, supra, section 3708 means what it says and continues to fit rationally into the legislative scheme. Comparative negligence, like contributory negligence, is unavailable to the employer. Were defendant's argument to prevail, uninsured employers would have a potential advantage over insured employers, a result clearly contrary to the Legislature's intent.
Moreover, the Legislature amended section 3708 in 1977, two years after Li was decided (Stats. 1977, ch. 17, Secs. 22, pp. 31-32), to add a second paragraph (not here relevant), but made no change in the defense provisions defendant attacks. (Ibid.) This too indicates the legislative intent to be as we have declared it....
In the event an employee or his or her dependents in case death has ensued, whose employer has failed to secure the payment of compensation, in lieu of proceeding against the employer by civil action in the Courts as provided in Labor Code section 3706, files an application with the Appeals Board for compensation, the Board will hear and determine such application for compensation in like manner as in other claims. The Board will also make such award to the claimant or his or her dependents as he or she would be entitled to receive if such employer had secured the payment of compensation as required.
The employer must pay the award in the manner and amount fixed thereby, or must furnish to the Board a bond in such an amount and with such sureties as the Board requires to pay the employee or his or her dependents the award in the manner and amount fixed thereby. (Lab. Code sec. 3715.)
The Director may file a lien against an illegally uninsured employer or an employer who has not secured the payment of compensation in the office of the county recorder in the counties where the employer's property is possibly located. Labor Code section 3720 provides:
(a) When the appeals board or the director determines under Section 3715 or 3716 that an employer has not secured the payment of compensation as required by this division or when the director has determined that the employer is prima facie illegally uninsured, the director may file for record in the office of the county recorder in the counties where the employer's property is possibly located, a certificate of lien showing the date that the employer was determined to be illegally uninsured or the date that the director has determined that the employer was prima facie illegally uninsured. The certificate shall show the name and address of the employer against whom it was filed, and the fact that the employer has not secured the payment of compensation as required by this division. Upon the recordation, the certificate shall constitute a valid lien in favor of the director, and shall have the same force, effect and priority as a judgment lien and shall continue for 10 years from the time of the recording of the certificate unless sooner released or otherwise discharged. A copy of the certificate shall be served upon the employer by mail, by the director. A facsimile signature of the director accompanied by the seal imprint of the department shall be sufficient for recording purposes of liens and releases or cancellations thereof considered herein. Certificates of liens may be filed in any or all counties of the state, depending upon the information the director obtains concerning the employer's assets.
(b) For purposes of this section, in the event the employer is a corporation, those persons whom either the appeals board finds are the parent or the substantial shareholders of the corporation or its parent, or whom the director finds pursuant to Section 3720.1 to be prima facie the parent or the substantial shareholders of the corporation or its parent, as defined in Section 3717, shall be deemed to be the employer, and the director may file the certificates against those persons.
(c) A person who claims to be aggrieved by the filing of a lien against the property of an uninsured employer because he or she has the same or a similar name, may apply to the director to have filed an amended certificate of lien which shows that the aggrieved applicant is not the uninsured employer which is the subject of the lien. If the director finds that the aggrieved applicant is not the same as the uninsured employer, the director shall file an amended certificate of lien with the county recorder of the county in which the aggrieved applicant has property, which shall show, by reasonably identifying information furnished by the aggrieved applicant, that the uninsured employer and the aggrieved applicant are not the same. If the director does not file the amended certificate of lien within 60 days of application therefor, the applicant may appeal the director's failure to so find by filing a petition with the appeals board, which shall make a finding as to whether the applicant and the uninsured employer are the same.
(d) Liens filed under this section have continued existence independent of, and may be foreclosed upon independently of, any right of action arising out of Section 3717 or 5806.
The Appeals Board may, upon the filing of an application by a proper party, direct the County Clerk to issue Writs of Attachment authorizing the Sheriff to attach the property of an uninsured employer as security for the payment of any compensation that may be awarded in a case. (Lab. Code sec. 5600.) If it is subsequently determined that the employer is insured and the insurance company is joined in the proceedings, the Appeals Board must forthwith discharge the attachment. (Lab. Code sec. 5602.)
The Uninsured Employers' Fund was created by the Legislature to ensure that employees who are injured in the course and scope of their employment receive adequate compensation even if their employers are uninsured. If the award is not paid by the employer, the award, upon application by the person entitled thereto, shall be paid by UEF. (Lab. Code, §3716, subd. (a).) Once paid, UEF obtains the right to collect the amount of the award from the employer, and may take the employer's house or other dwelling and other property to satisfy the award in a nonjudicial sale, with no exemptions from execution. (§3715.).
Failure to secure the payment of compensation as required by the Code, by a person who knew or because of his or her business knowledge or experience should be reasonably expected to have knowledge of the obligation to secure the payment of compensation, is a misdemeanor. (Lab. Code sec. 3700.5.)
Following a final findings and award or order by the Board, the Uninsured Employers Fund may file a certified copy of the order, decision, or award with the clerk of the Superior Court of any county.
Labor Code section 5806 provides:
Any party affected thereby may file a certified copy of the findings and order, decision, or award of the appeals board with the clerk of the superior court of any county. Judgment shall be entered immediately by the clerk in conformity therewith. The words "any party affected thereby" include the Uninsured Employers Fund. In any case in which the findings and order, decision, or award of the appeals board is against an employer that has failed to secure the payment of compensation, the State of California on behalf of the Uninsured Employers Fund shall be entitled to have judgment entered not only against the employer, but also against any person found to be parents or substantial shareholders under Section 3717....
Labor Commissioner Must Maintain A Program to Target Uninsured Employers
The Labor Commissioner must establish and maintain a program for targeting employers in industries with the highest incidence of unlawfully uninsured employers.
In carving out this program, the commissioner must establish and maintain a field enforcement unit and establish field offices in various cities in California.
The enforcement unit has the primary responsibility for administering and enforcing the statutes designed to insure that employees are not required or permitted to work under substandard unlawful conditions of for employers who have not secured the payment of workers' compensation benefits. See Labor Code section 90.3 through 90.5.