California's Employment Development Department administers the State Disability Insurance (SDI) program, which is a partial wage-replacement insurance plan for California workers.  

Since January 1, 2012, California employers have paid higher taxes because the state has not repaid money it borrowed from the federal government to pay unemployment insurance (UI) benefits. Unless Congress takes action (which is not expected), the higher tax will remain in effect through 2012 and then increase each year the state has an outstanding loan balance.

California’s UI Trust Fund has been insolvent since 2009.By the end of 2012, the UI Fund deficit is projected to reach $10.7 billion, according to the California Employment Development Department (EDD).

Employers will lose 0.3 percent of their federal tax credit, partially offset by the end of a 0.2 percent surcharge in July 2011.The 0.3 percent tax credit translates into approximately $21 per year for any employee who makes $7,000 or more in 2012. California employers pay UI taxes on the first $7,000 of wages per employee.

Statewide, the tax increase totals an estimated $289.8 million in 2012 and $615.7 million in 2013, according to the EDD October 2011 Unemployment Insurance Fund Forecast. This represents a loss of 0.6 percent of the tax credit in 2012, EDD reports.

The additional taxes paid will help offset California’s federal loan balance.

The California Department of Industrial Relations (DIR) announced the launch of a new task force to “combat the underground economy.”

The Labor Enforcement Task Force (LETF) will be made up of personnel from the Department of Industrial Relations, the Employment Development Department, the Contractor’s State License Board, the Board of Equalization and the Bureau of Automotive Repair. 

The LETF was created to crack down on businesses that do not follow the state’s labor laws — hiring employees off the books and paying them under the table.

According to DIR, businesses that operate underground may violate many laws, including not paying income taxes, unemployment insurance or disability insurance; not carrying workers’ compensation coverage; not paying proper wages; and not registering for required licenses and permits.  

“These underground operations subsequently pay lower overhead costs which give them an unfair competitive advantage over legitimate, law-abiding businesses,” the DIR said in a statement.

The DIR said the LETF was created to