BILL ANALYSIS Ó AB 970 Page 1 Date of Hearing: April 8, 2015 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 970 (Nazarian) - As Introduced February 26, 2015 SUBJECT: Labor Commissioner: enforcement of employee claims SUMMARY: Makes a number of changes related to the citation authority of the Labor Commissioner. Specifically, this bill: 1)Provides that, if upon inspection or investigation the Labor Commissioner determines that a person has violated overtime requirements of existing law, including "any applicable local overtime law," the Labor Commissioner may issue a citation. 2)Provides that, if upon inspection or investigation, the Labor Commissioner determines that a person has paid less than the minimum wage under applicable state or local law, the Labor Commissioner may issue a citation. 3)Makes related and conforming changes. 4)Authorizes the Labor Commissioner to issue a citation against an employer or person acting on behalf of an employer for violations of existing law related to reimbursements for expenses. AB 970 Page 2 FISCAL EFFECT: Unknown COMMENTS: This bill is sponsored by the California Rural Legal Assistance Foundation (CRLAF). They note that Governor Brown recently has signed several new statutes into law that addressed some of the weaknesses or gaps in the Labor Commissioner's legal authority to effectively enforce wage laws in a field investigation or to fully adjudicate wage related claims in a Berman administrative wage claim hearing. They argue that this bill closes two other important gaps in the Labor Commissioner's field enforcement authority and will strengthen her efforts to stop wage theft. Reimbursement Under Labor Code Section 2802 Existing Labor Code Section 2802 requires an employer to indemnify his or her employees for "all necessary expenditures or losses" incurred by the employee in direct consequence of his or her duties. A very common violation of this provision involves illegal charges for tools or equipment necessary to perform the job, but which are deducted from workers' pay notwithstanding. CRLAF states that, under current law, workers may file a civil action to recover these illegal deductions from their pay, or may seek to recover them in a Berman wage claim hearing. However, the Labor Commissioner cannot issue a citation for this violation, even if she determines upon inspection or investigation that the charges are illegal and have not been repaid to the worker. This bill would specifically authorize the Labor Commissioner to issue citations in such situations. Citation Authority for Local Minimum Wage or Overtime Provisions AB 970 Page 3 Existing law provides a legal framework for enforcement of state minimum wage and overtime wage requirements. However, the sponsor states that as more local California authorities have enacted higher minimum wage laws applicable to the lowest paid workers in their jurisdictions, the Labor Commissioner has been processing claims to enforce these higher wage requirements in Berman wage hearings. They argue that this bill recognizes this evolution and authorizes the Labor Commissioner to also issue a citation when she determines an employer has violated an applicable local wage law. CRLAF contends that this bill is likely to make a significant contribution to encouraging compliance with higher local living wage laws by giving the Labor Commissioner the discretion to cite when she finds violations of these laws. Employers would be subject to the same citation amounts, and have the same appeal rights, as would apply if they were cited for a violation of state minimum wage or overtime requirements. As noted above, the Labor Commissioner has been enforcing these local wage requirements in her wage claim hearings; this bill simply extends authority to cite when violations are encountered in the field. ARGUMENTS IN OPPOSITION A coalition of employer groups, including the California Chamber of Commerce, opposes this measure, stating that it will subject employers to layers of penalties and enforcement efforts, increased annual assessments, and a limited opportunity to appeal. First, opponents argue that under this bill, an employer would be subjected to local enforcement for any violation of a local minimum wage ordinance in addition to state enforcement by the Labor Commissioner, thereby layering state and local penalties onto an employer for the same violation. They contend that a local minimum wage mandate is a local issue and its enforcement AB 970 Page 4 should reside with the city or county that has enacted the measure, especially when such local entities have already implemented adequate enforcement measures to deal with violations. Second, opponents note that beginning in 2009 the costs of state labor law enforcement were primarily transferred from the General Fund to private sector employers through annual assessments on workers' compensation premiums, which are based upon the employers' payroll. Accordingly, any increase in the Labor Commissioner's jurisdiction will likely result in an increase to all employers' annual assessments. Employers statewide should not have to pay for these increased assessments for the enforcement of local laws where they are not located. Finally, opponents state that under the citation process, an employer challenging a citation can request an administrative hearing to contest the citation and may only challenge the administrative ruling pursuant to a writ of mandate. A writ of mandate limits the superior court's scope of review of the evidence and arguments the court may consider for purposes of challenging the administrative ruling. Comparatively, in wage claim adjudication through the Labor Commissioner's office, an employer has a right to a trial de novo to superior court if the employer wants to challenge an administrative ruling, which provides the court with unlimited review of the underlying complaint as well as any new issues, evidence or arguments raised on appeal. Accordingly, to the extent the Labor Commissioner is resolving any local minimum wage violations through the wage claim process, that process provides a fairer opportunity for an employer to appeal a ruling it believes was AB 970 Page 5 issued in error rather than the citation process. REGISTERED SUPPORT / OPPOSITION: Support Asian Americans Advancing Justice-Asian Law Caucus Bet Tzedek Legal Services' California Employment Lawyers Association California Immigrant Policy Center California Labor Federation, AFL-CIO California Nurses Association California Rural Legal Assistance Foundation (Sponsor) California Teamsters Public Affairs Council Wage Justice Center AB 970 Page 6 Opposition Associated Builders and Contractors of California California Association for Health Services at Home California Bankers Association California Chamber of Commerce California Employment Law Council California Grocers Association California Manufacturers and Technology Association California Pool & Spa Association California Restaurant Association California Trucking Association CAWA - Representing the Automotive Parts Industry Chamber of Commerce Mountain View AB 970 Page 7 El Centro Chamber of Commerce & Visitors Bureau Fullerton Chamber of Commerce Greater Conejo Valley Chamber of Commerce Greater Fresno Area Chamber of Commerce National Federation of Independent Business Palm Desert Area Chamber of Commerce Redondo Beach Chamber of Commerce and Visitors Bureau San Jose Silicon Valley Chamber of Commerce Santa Clara Chamber of Commerce & Convention-Visitor's Bureau Santa Maria Valley Chamber of Commerce Visitor and Convention Bureau Simi Valley Chamber of Commerce South Bay Association of Chambers of Commerce Western Electrical Contractors Association AB 970 Page 8 Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091