SB 1065 amends Labor Code section 1433 to restate where registration fees and civil fines related to property service (janitorial) work must be deposited and to narrow the permitted uses of that money. The bill specifies that fees collected under Section 1427, fines under Section 1432, and other statutorily designated moneys go into the Labor Enforcement and Compliance Fund, and it limits spending from that fund to costs tied to registering contractors and enforcing the statute.
The bill also requires the annual employer registration renewal fee (and any adjusted application renewal fee) to be set high enough to cover direct costs and a reasonable percentage of indirect costs the Division incurs administering this part. Although the Legislative Counsel characterizes the changes as nonsubstantive, the language formalizes cost-recovery authority and tightens the fund's permitted uses—changes with practical implications for employers, the Division of Labor Standards and Enforcement, and funding of enforcement activity.
At a Glance
What It Does
Requires that registration fees (Section 1427), civil fines (Section 1432), and other designated moneys be deposited into the Labor Enforcement and Compliance Fund and limits use of those moneys to registration administration and enforcement by the Division of Labor Standards and Enforcement. Directs that renewal fees be set to cover direct costs and a reasonable share of indirect costs.
Who It Affects
Employers who register as janitorial/property service contractors under Section 1427, the Division of Labor Standards and Enforcement (DLSE), and the administrators of the Labor Enforcement and Compliance Fund. Small and large property service firms that pay annual renewal fees will be directly affected by any fee-setting changes.
Why It Matters
The bill formalizes a cost-recovery framework that can drive higher employer fees to sustain enforcement and registration operations. For compliance officers and finance teams, it signals a clearer revenue stream dedicated to enforcement—but also potential upward pressure on registration costs and new administrative responsibilities for the Division.
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What This Bill Actually Does
SB 1065 rewrites Section 1433 to make four practical points: where money associated with janitorial contractor registration and penalties must go, what those funds may be spent on, and how renewal fees should be set. The centerpiece is a firm match between the revenue source—registration fees and civil fines—and the program that spends them: registration administration and enforcement by the Division of Labor Standards and Enforcement.
Under the bill, the Labor Enforcement and Compliance Fund becomes the exclusive repository for the fees and fines covered by Sections 1427 and 1432, plus any other moneys a statute or order designates. The bill then confines spending from that pot to (1) reasonable costs to run the registration program and (2) costs and obligations tied to administering and enforcing the statutory scheme.
That second phrase is broad and likely to include investigations, audits, compliance reviews, and related enforcement operations.The bill also addresses fee-setting: it requires the annual employer registration renewal fee, and any adjusted application renewal fee, to be set at levels sufficient to cover the Division’s direct costs and a 'reasonable percentage' of indirect costs. That language moves fee-setting from a discretionary backstop to an express cost-recovery obligation—putting the onus on the Division (and ultimately the fee-paying employers) to fund both operational and allocated overhead costs.Though the Legislative Counsel labels the changes nonsubstantive, they matter in practice.
The clarified deposit rule and the explicit cost-recovery directive change how the Division will budget and justify fees, create a legal basis for higher renewal fees, and limit the Fund’s use to a narrower set of activities. Implementation will require the Division to adopt a cost-allocation approach and to explain what it considers a 'reasonable percentage' of indirect costs.
The Five Things You Need to Know
Section 1433(a) requires all registration fees collected under Section 1427, civil fines under Section 1432, and other statutorily designated moneys to be deposited into the Labor Enforcement and Compliance Fund.
Section 1433(b) restricts Fund spending to (1) reasonable costs of administering janitorial contractor registration and (2) costs and obligations tied to administration and enforcement of this part.
Section 1433(c) requires the annual employer registration renewal fee and any adjusted application renewal fee to be set at amounts sufficient to cover the Division’s direct costs plus a 'reasonable percentage' of indirect costs.
The bill standardizes the agency reference to the 'Division of Labor Standards and Enforcement,' clarifying which Division is responsible for using the Fund.
The statutory language contains a drafting irregularity ('specified in of Section 1427') that may require technical correction or administrative interpretation when setting renewal fees.
Section-by-Section Breakdown
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Designation of fund receipts
This subsection lists the specific revenue sources that must go into the Labor Enforcement and Compliance Fund: registration fees under Section 1427, civil fines under Section 1432, and any other moneys a statute or order designates. Practically, this locks those revenue streams outside the general fund and makes them available only through the designated fund, which affects how the state accounts for and allocates money tied to janitorial registration and enforcement.
Permitted use — registration administration
Clause (1) confines Fund spending to the 'reasonable costs' of running the janitorial contractor registration program. That creates an affirmative budgetary purpose tied to the mechanics of registration—staffing the registration unit, processing applications, maintaining records, and related operational expenses—rather than allowing those dollars to be used for unrelated labor programs.
Permitted use — administration and enforcement
Clause (2) permits Fund spending on 'costs and obligations associated with the administration and enforcement' of the statutory part. The phrase is deliberately broad and can encompass investigations, compliance sweeps, audits, legal defense or prosecution tied to enforcement, and any contractual obligations for enforcement-related services. That breadth gives the Division flexibility but raises questions about limits and oversight.
Fee-setting standard — cover direct and shared overhead
This subsection directs that the annual employer registration renewal fee and any adjusted application renewal fee be set to cover direct costs and a 'reasonable percentage' of indirect costs. It shifts fee-setting from ad hoc to a cost-recovery standard, requiring the Division to determine both the direct expenses of the program and an allocation method for overhead (IT, HR, rent) it deems reasonable. The lack of a definition for 'reasonable percentage' leaves significant discretion to the administering agency and could be a point of contention.
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Explore Employment in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Division of Labor Standards and Enforcement — gains a clearly designated revenue stream and statutory authority to recover both direct and a share of indirect costs, improving budget predictability for registration and enforcement activities.
- Workers in the property service (janitorial) sector — stand to benefit indirectly if the dedicated funding leads to more consistent enforcement of wage and hour laws and better compliance oversight.
- State fiscal managers — receive a clearer earmark for these fees and fines, which simplifies accounting and prevents commingling with the general fund.
Who Bears the Cost
- Registered janitorial/property service employers — face the risk of higher annual renewal fees as the Division sets charges to recover direct and indirect costs; small firms may feel the impact disproportionately.
- Unregistered or noncompliant businesses — remain exposed to civil fines under Section 1432, with those fines explicitly routed to the dedicated Fund.
- Division staff and budget offices — must develop and defend cost-allocation methodologies, produce documentation supporting the 'reasonable percentage' of indirect costs, and manage a more prescriptive funding model that may require new administrative processes.
Key Issues
The Core Tension
The central tension is between sustainable, dedicated funding for registration and enforcement—achieved by authorizing cost-based fees—and the risk of shifting public enforcement costs onto the regulated parties, especially small employers, without a transparent, bounded methodology for calculating what constitutes a 'reasonable' share of indirect costs.
The bill outfits an enforcement program with a clearer funding rule, but it leaves important implementation levers undefined. 'Reasonable percentage' is not quantified or tied to a methodology, so the Division will need to adopt internal policies or regulations to translate that phrase into specific allocations; those choices can materially affect employer fees and could attract administrative or judicial challenges. Similarly, the broad authorization to use Fund moneys for 'costs and obligations associated with administration and enforcement' invites debate over whether legal expenses, settlements, or cross-program overhead fit within the restriction.
There is also a drafting oddity in subsection (c) ('specified in of Section 1427') that appears to be a clerical error. While the bill overall is characterized as nonsubstantive, that glitch may require a technical amendment or administrative interpretation before fee rules are finalized.
Finally, dedicating enforcement funding through fees shifts the financing burden away from the general fund and onto regulated businesses; that is efficient for program sustainability but raises questions about fairness, proportionality for small employers, and democratic accountability for public enforcement priorities.
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