Governor Brown Signs Legislation Preventing Employees Benefitting from Defrauding Workers Compensation Insurance

Friday, October 5, 2012

CONTACT: Stephanie Ong Stillman, DA Gascón’s Office, (415) 553-1167 or (415) 740-5134
ADA Alex Bastian, DA Gascón’s Office, (415) 553-1931

San Francisco – This week Governor Jerry Brown signed into law Senate Bill 1177, legislation preventing employers convicted of criminal negligence resulting in the death or serious injury of an employee from offsetting victim restitution with employee compensation insurance without proof of paid policy premiums. SB1177, authored by Senator Mark Leno and sponsored by District Attorney George Gascón ensures victims receive full compensation from the defendant and helps deter employee insurance fraud

“The passage of SB1177 sends a strong message to unscrupulous employers that we expect them to provide safe working environments and workers compensation coverage for workers,” said District Attorney George Gascón.

California legislation requires a crime victim receive restitution directly from the convicted defendant. California law also allows employers convicted of criminal negligence to use workers compensation payouts to offset the amount owed to the victim. Under a loophole in the previous law, employers could use worker’s compensation payouts regardless of whether workers compensation premiums had been paid for that victim.

“This loophole is fundamentally at odds with the defendant’s duty to make restitution to the victim and reward that defendant’s criminal behavior”, said District Attorney George Gascón.

Senate Bill 1177 is a result of an actual San Francisco court case. In People v. Shim, Kim, and California C&R, Inc., the defendant reduce his restitution obligation using worker’s compensation insurance-despite having pled guilty to worker’s compensation fraud related to the victim. The victim, Antonio Martinez was one of several employees working on a roofing project in San Francisco. Martinez was working along the roof’s edge when he fell 38 feet to his death. There were no safety measures in place at the worksite or written safety policies which is in violation of Cal/OSHA regulations. Shim pled guilty to four felonies: involuntary manslaughter, willful violation of Cal/OSHA order causing death, workers compensation premium fraud; and tax evasion. California C&R, Inc. pled guilty to one felony count of willful violation of Cal/OSHA order causing death. Kim pled guilty to one misdemeanor count of willful violation of Cal/OSHA order causing death. Martinez was survived by his wife and children.

In addition to upholding mandates of the California Constitution that victims of crime who have suffered economic loss have a right to full restitution from the defendant, the legislation creates a significant deterrent to employee insurance fraud and helps level the playing field for law-abiding businesses.