BILL ANALYSIS
Senate Committee on Industrial
Relations 1999-2000 Regular Session Hilda L. Solis,
Chair
Fiscal: Yes
Urgency: No
Bill No: AB 2509
Author: Steinberg
Version: As Amended June 26, 2000
Subject:
Wage and Hour Violations: enforcement procedures; penalties
Support:
California Labor Federation, AFL-CIO (Sponsor)
Employment Law Center, Legal Aid Society of San Francisco
Mexican American Legal Defense and Educational Fund
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
Engineers and Scientists of California
Hotel Employees, Restaurant Employees International Union
Region 8 States Council of the United Food & Commercial
Workers
Service Employees International Union
Transport Workers Union of America
American Federation of State, County and Municipal
Employees
Opposition:
California Chamber of Commerce
California Manufacturers and Technology Association
California Retailers Association
Orange County Business Council
Consulting Engineers and Land Surveyors of California
Printing Industry Association of California
California Business Properties Association
California Farm Bureau Federation
Western Growers Association
California Landscape Contractors Association
Woodworking Institute of California
California Association for Health Facilities at Home
California Hotel and Motel Association
Lumber Association of California and Nevada
California Association of Builders and Contractors
Associated General Contractors
Civil Justice Association of California
Purpose:
To streamline and alter many enforcement and administrative
procedures of wage and hour laws before the Labor
Commissioner and the courts, increase civil penalties and
damages for violations.
Analysis:
Existing law structures a framework for the enforcement of
laws relating to the payment of wages and overtime
compensation, and working conditions by the Labor
Commissioner, chief of the Division of Labor Standards
Enforcement of the Department of Industrial Relations.
Under the following categories, existing law and this bill
provide that:
1. Administrative Proceedings: Consolidation
Separate administrative hearings by the Labor Commissioner
are required to establish 1) if minimum wages are owed and
2) what civil penalties should be assessed: $50 for an
initial violation and $250 for subsequent violations.
This bill permits the Labor Commissioner to combine both
proceedings into one hearing.
2. Subpoenas; Mail Notice
The Labor Commissioner in an administrative wage claim
proceeding may obtain records relating to the claim by
issuance of a subpoena served by personal service.
This bill permits the Labor Commissioner to obtain records
through a notice by mail rather than by a subpoena, and to
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require all documents requested by subpoena or notice to be
received not less than 5 days prior to a hearing.
3. Interest
The legal rate of interest on unpaid wages due pursuant to
an award by the Labor Commissioner is based on a statute
which was repealed in 1993. Under breach of contract
provisions in the Civil Code, courts may award interest on
wages due at 10%.
This bill references the Civil Code section for 10%
interest for Labor Commissioner awards.
4. Appeals: Bonds; Court Costs
An employer may seek a de novo review of the Labor
Commissioner's order, decision, or award following an
administrative hearing.
This bill requires an employer that seeks such a review to
post a surety bond or deposit in the amount of the award
with the court of jurisdiction. Also, a requirement of
judicial arbitration does not apply in such circumstances.
This bill also permits the court to award attorney's fees
and costs to the Labor Commissioner in the same manner as
private counsel.
5. Right of Private Action: Unpaid Wages
Most prevailing parties in a civil suit to recover unpaid
wages or overtime compensation are entitled to be awarded
reasonable attorney's fees and costs.
This bill would clarify two overlapping sections of the
law, specifying that an employee, separate from other wage
cases, is eligible to be awarded interest, in addition to
wages due and attorney's fees and costs.
6. Liquidated Damages: Unpaid Minimum Wages
A court may award liquidated damages in an amount equal to
the unpaid wages and interest due thereon for violation of
minimum wage laws. The award may only be a result of a
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civil suit filed by the complainant or by the Labor
Commissioner.
This bill permits the Labor Commissioner to award
liquidated damages in the same manner as a court, instead
of requiring the state agency to file a suit to recover
such damages.
7. Wage Bonds
The Labor Commissioner may order an employer to post a bond
to ensure future payment of wages in cases where the
employer has failed to satisfy a final judgment for
nonpayment of wages.
This bill permits the Labor Commissioner to require that
the bond also include interest penalties and other demands.
8. Shareholder Liability
Substantial shareholders of a corporation may be found
jointly and severally liable for the corporation's failure
to secure workers' compensation insurance in action brought
by the Director of Industrial Relations.
This bill would make the parent and substantial corporate
shareholders jointly and severally liable with the
corporation for unpaid wages and penalties. Liability
would apply to shareholders owning at least 15 percent of
the total value of stock or beneficial interests in the
corporation.
9. Successor Liability
A garment manufacturer employer that is a successor to an
employer who owes wages to former employees is liable for
those wages if the successor meets any of the following
criteria:
-uses substantially the same physical facilities to
produce the same product for the same customer base;
-employs the same managers who control the wages and
working conditions; and
-is an immediate family member of any owner, partner,
or officer of the previous employer.
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This bill would extend successor liability to all wage
claims, regardless of the industry of the employer.
10. Insufficient Funds: Waiting Time Penalties
Building and construction industry employers are subject to
30 day waiting time penalties where wages or fringe
benefits are paid with a check for which payment is refused
due to insufficient funds.
This bill would extend the penalties to all employers,
regardless of industry, and be in addition to other
applicable penalties under law.
11. Itemized Wage Statements: Piecework
Employers are required to issue an itemized wage statement
when wages are due including net and gross wages earned,
hours worked (excluding salaried employees and exempt from
daily overtime pay), dates of work, and all deductions.
This bill requires the number of piecework units earned and
the applicable piece rate(s) to be listed.
12. Itemized Wage Statements and Records: Penalties; Right
of Private Action
Violators of the wage statement requirement are subject to
a civil penalty of $250 for the initial violation and $1,00
for subsequent violations. Proven inadvertence is taken
into consideration.
For a knowing and intentional violation, actual damages or
$100, whichever is greater, plus reasonable attorney's fees
and costs.
This bill provides that the penalty for an employer that
fails to maintain records on each employee, a penalty equal
to a year's wages for the number of all workers employed
the previous year may be awarded, unless the employer can
prove a lesser amount is justified.
For a knowing and intentional violation, this bill permits
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an employee to recover a penalty of up to $100 per payroll
period up to a maximum of $10,000. The employee may bring
a claim before the Labor Commissioner or file a civil
action for damages or penalties, and attorney's fees.
13. Payroll Records: Content
Employers must maintain payroll records containing
specified information: an employee's name, address, hours,
and various rates of pay during each payroll period. Also,
IWC Orders require employers with piece rates to fully
explain them to employees and keep production records.
This bill requires the amount of piecework units earned and
the piece rate(s) to be part of the mandated records to be
held by the employer, and applicable current IWC Orders
recordkeeping requirements.
14. Payroll Records: Penalties
Willful failure to maintain payroll records subjects an
employer to a civil penalty of $500.
This bill would decrease the penalty from $500 to $100 per
employee for each payroll period up to a maximum period of
three years.
15. Rest and Meal Periods: Right of Private Action
Applicable Orders of the Industrial Welfare Commission
(IWC) require that employers must provide a 10 minute rest
period every 4 hours and a 30 minute meal period every 5
hours. On-duty meal periods are permitted when the nature
of the work performed so dictates.
This bill prohibits employers from requiring any employee
to work during any meal or rest period mandated by an
applicable IWC Order. Violators would be subject to a $50
civil penalty and an amount twice the hourly rate of pay,
or piece work pay, of the full meal or rest period. In
addition to filing with the Labor Commissioner, the
employee would have the option of filing a civil court
action, and the award of attorney's fees and costs.
16. Discrimination Complaints; Right of Private Action
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Employers may not discharge or discriminate against an
employee for seeking compliance with labor laws. An
employee may file a complaint against the employer with the
Labor Commissioner. If the Commissioner dismisses such a
complaint, the employee may seek an appeal of the dismissal
with the U.S. Department of Labor if it involves
occupational safety and health issues.
This bill would require that if the U.S. Department of
Labor determines that the Labor Commissioner erred in
dismissing an employee complaint, the Commissioner shall,
within 15 days, either notify the parties of the ongoing
federal investigation of the complaint, or issue a new
state determination in the matter.
It would also permit an employee to file a civil action for
unlawful retaliation without first filing a discrimination
complaint with the Commissioner.
17. Posting of Violation Notices
Employers are required to post in the workplace
specified information, including applicable Wage Orders of
the Industrial Welfare Commission.
This bill would require employers found engaging in a
pattern and practice of violating wage and hour laws to
post a notice issued by the Labor Commissioner for not less
than 60 days, describing the nature of the violation and
related information. Failure to post a notice subjects an
employer to a $500 civil penalty for each instance of
refusal.
18. Gratuities: Dancers
Gratuities or tips which have been paid to or left for an
employee by a patron, above the actual amount due, are the
property of the employee. An employer may not receive
gratuities intended for the employee, or deduct or credit
such gratuities against wages due.
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This bill would specify that amounts left by patrons for
dancers employed in public housekeeping establishments
(e.g. casinos, restaurants, night clubs) or in the
amusement or recreation industry are deemed gratuities.
This clarifies situations where dancers may be incorrectly
identified as independent contractors and not employees
entitled to keep gratuities.
19. Gratuities: Payments & Processing Fees
Employers are not specifically prohibited from deducting
processing fees associated with gratuities paid by credit
cards.
This bill would prohibit an employer from deducting from a
gratuity left on a credit card slip any processing fee or
cost. Gratuities made by credit card must be paid the
employee not later than the next regular payday following
the date the patron authorized the credit card payment.
20. Necessary Tools or Equipment: Purchase; Penalties
Applicable Orders of the Industrial Welfare Commission
(IWC) require that employers must provide and maintain
necessary tools or equipment for the job. Employees
earning at least twice the minimum wage may be required by
the employer to provide and maintain such elements
themselves.
This bill would require that if the employer fails to
provide or maintain the tools and equipment necessary, and
the employee purchases such elements, the employer must:
-purchase the elements equal to the price paid by the
employee; or
-pay the employee at least twice the minimum wage, in order
for the employee to be exempted from providing and
maintaining necessary tools and equipment.
Comments:
1. Proponents argue that California has a large and
growing Underground Economy of employers who are
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chronic violators of wage and hour, safety, and tax
laws. Such employers pay cash under the table or with
checks that bounce, fail to report and pay employment
taxes, work their employees long hours without rest
breaks, and avoid paying wage judgments issued against
them. They cheat workers out of billions of dollars
in wages due hard working employees.
Illegal activity by flagrant violators of basic labor
laws is unfair to law-abiding employers who find it
difficult to compete in such an environment.
Proponents cite Executive Orders concerning the
expanding Underground Economy issued by Governors
Deukmejian and Wilson, noting a $60 billion lawless
enterprise and the state's 1993 loss of $3 billion in
taxes alone.
Supporters generally state that the administrative
procedures streamlined in this measure have been well
discussed by labor, management, and state enforcement
officials over the years and are long overdue.
2. Opponents state that they have serious concerns
regarding nearly all of the changes proposed by this
bill and their collective impact on employers who even
inadvertently violate a wage and hour law. These
include: authorizing the Labor Commissioner to create
new, different rules of evidence and subpoenas
process; eliminating judicial discretion to require
non-binding arbitration on appeals; reopening of
previously dismissed claims when letters criticizing a
state program are filed with the federal government;
establishment of joint, and several liability for
substantial shareholders and successive employers; and
new, mandated payment of restitution plus civil
penalties for failure to pay minimum wages consisting
of all underpaid wages, any interest owed and
statutory liquidate damages.
The California Chamber of Commerce additionally argues
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that this measure contains provisions that were vetoed
last year by Governor Davis as too broad and
excessive.
3. Administration Position . The Department of Industrial
Relations has not taken a position on this measure.
4. Double Referral . This measure has also been referred
to the Senate Committee on Judiciary for
consideration.
5. Vote History . This measure passed the Assembly Labor
and Employment Committee by a 6 to 3 vote and the
Assembly Floor by a 41 to 32 vote.
6. Prior Legislation . This measure is similar to AB 1652
(Steinberg) of 1999 which was vetoed by the Governor.
It does not contain several elements that were
encompassed within the vetoed bill, including a
private right of action to recover and share in a
portion of the state's civil penalties for wage
violations.
The Governor's veto message of AB 1652 said, in part:
"?.This legislation, while laudable in its intent,
duplicates many existing enforcement efforts and contains
excessive penalties.
Existing law already provides penalties against employers
who issue bad checks
for payment of wages. Additionally, requiring employers
who engage in a
pattern of violating wage and hour laws to post a
declaration that there will
be no further violations is unworkable and meaningless.
This legislation, as
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drafted, is overly broad.
I would be happy to consider additional legislation to
protect workers against
unscrupulous employers if present enforcement efforts
prove to be
insufficient."
Hearing Date: June 28, 2000 AB
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Consultant: Patrick Henning Page
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