BILL ANALYSIS
SB 796
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Date of Hearing: June 26, 2003
ASSEMBLY COMMITTEE ON JUDICIARY
Ellen M. Corbett, Chair
SB 796 (Dunn) - As Amended: May 12, 2003
As Proposed to be Amended
SENATE VOTE : 21-14
SUBJECT : LABOR CODE PRIVATE ATTORNEYS GENERAL ACT OF 2004
KEY ISSUES :
1)SHOUILD CIVIL PENALTIES BE ESTABLISHED, AS SPECIFIED, FOR THE
VIOLATION OF LABOR CODE PROVISIONS FOR WHICH THERE IS NO
CURRENT CIVIL PENALTY?
2)SHOULD AGGRIEVED EMPLOYEES BE EMPOWERED TO ENFORCE EXISTING
LABOR CODE OBLIGATIONS BY PRIVATE ACTIONS FOR CIVIL PENALTIES
TO BE DISTRIBUTED PRIMARILY TO THE STATE?
SYNOPSIS
This bill, co-sponsored by the California Labor Federation,
AFL-CIO and the California Rural Legal Assistance Foundation, is
designed to improve enforcement of existing Labor Code
obligations. The first part of the bill prescribes a civil
penalty for those existing Labor Code sections for which a civil
penalty has not otherwise been established. The second part of
the bill provides that an aggrieved employee may bring a private
action on behalf of himself or herself and other current or
former employees to enforce civil penalties for employer
violations of the Labor Code, if the Labor and Workforce
Development Agency (LWDA) does not issue a citation for a
violation of the same sections on the same facts and theories.
Seventy-five percent of the civil penalties imposed by a court
would be distributed to the General Fund and to the LWDA for
education of employers and workers regarding labor law
obligations; 25% would go to the aggrieved employee(s).
Prevailing employees would be permitted to recover attorneys'
fees in these cases. Opponents representing employers argue
that the bill will foster frivolous litigation, and lawsuits for
minor or technical violations of the law, and accordingly will
drive up the cost of doing business.
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SUMMARY : Enacts the Labor Code Private Attorneys General Act of
2004. Specifically, this bill :
1)Provides that any Labor Code violation for which specific
civil penalties have not otherwise been established shall be
subject to a civil penalty of $100 for each aggrieved employee
per pay period for an initial violation, and $200 for each
aggrieved employee per pay period for continuing violations.
The penalty would be $500 per violation for a violator who is
not an employer.
2)Provides that an aggrieved employee may sue to recover civil
penalties under the Labor Code, as well as attorneys' fees and
costs, in an action brought on behalf of himself or herself
and other current or former employees. However, no private
action may be maintained where the state labor agency (LWDA)
issues a citation against the alleged violator on the same
facts and under the same section or sections of the Labor
Code.
3)Provides that any penalties recovered in an action by an
aggrieved employee shall be distributed as follows: 50
percent to the General Fund, 25 percent to the LWDA for
employer education, and 25 percent to the aggrieved
employee(s). In the case of penalties recovered against a
violator who is not an employer, which under this bill could
be pursued only by a public prosecutor or the LWDA, the funds
would be divided evenly between the General Fund and the LWDA.
EXISTING LAW :
1)Authorizes the LWDA (composed of the Department of Industrial
Relations (DIR), the Employment Development Department, the
Agricultural Labor Relations Board, and the Workforce
Investment Board) to assess and collect civil penalties for
violations of the Labor Code, where specified. (Labor Code
section 201 et seq . All further statutory references are to
this code unless otherwise noted.)
2)Authorizes the Attorney General (AG) and other public
prosecutors to pursue misdemeanor charges against violators of
specified provisions of the code. (Section 215 et seq .)
3)Authorizes an individual employee to file a claim with the
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Labor Commissioner alleging that his or her employer has
violated specified provisions of the code, and to sue the
employer directly for damages, reinstatement, other
appropriate relief and attorneys' fees if the Commissioner
declines to bring an action based on the employee's complaint.
(Section 98.7.)
4)Provides that the AG, other prosecutors and any person acting
for him or herself, members of a group or the general public,
may sue to enjoin any unlawful, unfair, or fraudulent business
act or practice, and that a court may make any orders or
judgments as may be necessary to prevent the use or employment
by any entity of any practice which constitutes unfair
competition, including issuing an injunction or appointing a
receiver, and may order restitution of any money or property
which may have been acquired by means of the unfair
competition. (Business and Professions Code sections 17203
and 17535.)
FISCAL EFFECT : The bill as currently in print is keyed fiscal.
COMMENTS : In support of this measure, the author states: "This
bill is critical to the enforcement of worker's rights.
California has some important worker protections in statute -
some of the strongest in the nation. However, these laws are
meaningless if they are not enforced. Workers must be able to
seek redress against employers who break the law."
Co-sponsor California Labor Federation states that this bill
would "attack the underground economy and enhance our state's
revenues" by allowing workers to crack down on labor violators.
The California Rural Legal Assistance (CRLA) Foundation, also a
co-sponsor, states that violations of minimum or overtime wage
violations are common, and many other violations for which only
rarely enforced criminal penalties exist are increasing.
This Bill Provides Specified Civil Penalties for Violations of
Existing Labor Code Provisions . The Labor Code is enforced by
the LWDA, which may assess and collect civil penalties for
specified violations of the code. Some Labor Code sections also
provide for criminal sanctions, which may be obtained through
actions by the AG and other public prosecutors. As the author
notes, however, some provisions of the Labor Code have criminal
penalties but no civil penalties. The sponsors state that many
Labor Code provisions are unenforced because they are punishable
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only as criminal misdemeanors, with no civil penalty or other
sanction attached. Since district attorneys tend to direct
their resources to violent crimes and other public priorities,
supporters argue, Labor Code violations rarely result in
criminal investigations and prosecutions. As a result,
supporters state, employers may violate the law with impunity.
This bill would attach a civil penalty of $100 for each
aggrieved employee per pay period (increasing to $200 for each
aggrieved employee per pay period for subsequent violations) for
any Labor Code provision that does not otherwise specify a civil
penalty for its violation. The sponsors state that this
proposed penalty is "on the low end" of the range of existing
civil penalties for violation of other Labor Code provisions,
but should be significant enough to deter violations. Indeed,
serious safety and health violations are punishable by civil
penalties up to $25,000. (Section 6428.) Civil penalties
collected in any such action would be distributed as follows: 50
% to the General Fund, 25 % to the LWDA for education of
employers and workers regarding labor law obligations, and 25 %
to the aggrieved employee(s). If the defendant is not an
employer (e.g., a labor contractor who violates licensing
obligations), the entire civil penalty recovery would be
distributed to the General Fund and the LWDA.
The Bill Would Allow Aggrieved Employees To Bring Private
Actions To Recover Civil Penalties . The author states:
"Unfortunately, creating a civil penalty is not enough. As we
face a budget crisis of epic proportions, the enforcement staff
of state labor law enforcement agencies is being cut. A civil
penalty is meaningless to an injured worker if there is no
mechanism to collect the penalty. This bill allows the employee
to seek redress directly where the state has not done so on the
employee's behalf. Additionally, SB 796 helps generate revenues
to the state at a time when we need them."
According to the California Labor Federation, in the last
decade, as California has grown to become one of the world's
largest economies, state government labor law enforcement
functions have failed to keep pace. The state's current
inability to enforce our existing labor laws effectively is due
to inadequate staffing and to the continued growth of the
underground economy. This inability coupled with our severe
state budget shortfall calls for a creative solution that will
help the state crack down on those who choose to flout our laws.
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The sponsors state that private actions to enforce the Labor
Code are needed because LWDA simply does not have the resources
to pursue all of the labor violations occurring in the garment
industry, agriculture, and other industries. Although the
Unfair Competition Law (UCL), Section 17200 of the Business &
Professions Code, permits private actions to enjoin unlawful
business acts, the sponsors assert that it is an inadequate tool
for correcting Labor Code violations. First, the UCL permits
private litigants to obtain only injunctive relief and
restitution, which the sponsors say is not a sufficient
deterrent to some labor violations. Second, since the UCL does
not award attorneys' fees to a prevailing plaintiff, few
aggrieved employees can afford to bring an action to enjoin the
violations. Finally, since most employees fear they will be
fired or subject to hostile treatment if they file complaints
against their employers, they are discouraged from bringing UCL
actions.
Generally, civil penalties are recoverable only by prosecutors,
not by private litigants, and the monies are paid directly to
the government. However, recovery of civil penalties by private
litigants does have precedent in the law. For example, the
Unruh Civil Rights Act allows the victim of a hate crime to
bring an action for a civil penalty of $25,000 against the
perpetrator of the crime. (Civil Code sections 51.7, 52.) In
this bill, allowing private recovery of civil penalties as
opposed to statutory damages would allow the penalty to be
dedicated in part to public use (to the General Fund and the
LWDA) instead of being awarded entirely to a private plaintiff.
Labor Code violators who are not employers would be subject to
suit only by the LWDA or by public prosecutors under this bill,
not by private parties.
Current Law Allows Private Actions for Injunctive Relief For
Violations of the Labor Code, As Well As Money Damages For Some
Labor Code Violations . Under the UCL, employers may be sued by
employees and other private parties for injunctive relief for
violation of any provision of the Labor Code. In addition, some
Labor Code provisions allow for private actions for money
damages, including attorneys' fees. As noted above, employers
are also subject to civil penalties and criminal prosecution for
some Labor Code violations. Thus, the primary change effected
by this bill would be to add the specified civil penalties to
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private actions for violations of the Labor Code.
Only Persons Who Have Actually Been Harmed May Bring An Action
to Enforce The Civil Penalties . Mindful of the recent,
well-publicized allegations of private plaintiff abuse of the
UCL, the sponsors state that they have attempted to craft a
private right of action that will not be subject to such abuse.
Unlike the UCL, this bill would not permit private actions by
persons who suffered no harm from the alleged wrongful act.
Instead, private suits for Labor Code violations could be
brought only by an employee or former employee of the alleged
violator against whom the alleged violation was committed. This
action could also include fellow employees also harmed by the
alleged violation. Because there is no provision in the bill
allowing for private prosecution on behalf of the general
public, there is no issue regarding the lack of finality of
judgments against employers, as there has been with respect to
private UCL actions. In addition, the bill precludes any
private action when the LWDA issues a citation on the same facts
and under the same code provisions. Thus, there is no prospect
of public and private prosecution for the same violation.
The sponsors state that because the proposed civil penalties are
relatively low and nearly all of the penalty recovery would be
divided between the LWDA and the General Fund, the addition of
civil penalties would discourage any potential plaintiff from
bringing suit over minor violations in order to collect a
"bounty" in civil penalties.
ARGUMENTS IN OPPOSITION : The employer groups opposing the bill
do not contest the provision imposing new civil penalties.
However, they argue that SB 796 will encourage private attorneys
to "act as vigilantes" pursuing frivolous Labor Code violations
on behalf of different employees, and that this incentive will
be increased by allowing employees to recover both attorneys'
fees and a portion of the penalties. Opponents liken the danger
of the bill to the recent abuse of the UCL by the Trevor Law
Group.
The California Chamber of Commerce argues in particular against
allowing recovery of attorneys' fees, contending that recovery
for the aggrieved party would be minimal and secondary to
attorneys' fees and cost. In addition the Chamber argues that
since the bill would allow for an award of attorneys' fees to
prevailing employees, but not to employers when they prevail, SB
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796 would clog already overburdened courts because there would
be no disincentive to pursue meritless claims. Moreover, the
Chamber contends, since the bill does not contain any
requirement for the employee to exhaust the administrative
procedure or even file the claim with the Labor Commissioner
before filing with the civil court, SB 796 is an open invitation
for bounty hunting attorneys to aggressively pursue these cases.
The California Employment Law Council states that the Labor Code
contains innumerable penalty provisions, many of which would be
applicable to minor and inadvertent actions. Under current law,
CELC argues, the prospect of excessive penalties is mitigated by
prosecutorial discretion, which would disappear under SB 796.
If, for example, a large employer inadvertently omitted a piece
of information on a paycheck, a private attorney general could
sue for penalties that could reach staggering amounts if the
inadvertent deletion of information on a paycheck went on for
some time, CELC argues.
The Civil Justice Association of California likewise opposes the
measure, writing:
If enacted, SB 796 will expose businesses to frivolous
lawsuits and create a new litigation cottage industry
for unelected private attorneys performing the duties
of a public agency whose staffs are responsible to the
general public. It will drive up costs to businesses
and taxpayers, and further California's reputation for
having an unfair liability law system. ? The
Legislature should find another solution to the
staffing problems of state agencies rather than
"deputizing" employees who would usually hire a private
attorney to act as a private attorney general.
ARGUMENTS IN SUPPORT : In response to opposition arguments,
supporters contend that this bill is consistent with other
provisions of the Labor Code. With respect to attorneys' fees,
supporters argue that the bill adopts the customary Labor Code
approach that attorneys' fees are limited to a prevailing
employee. Supporters also note that current law provides
sanctions for any frivolous filings. On the issue of exhaustion
of administrative procedures, supporters contend that there is
no current requirement that employees file claims with the LWDA
or exhaust administrative procedures prior to bringing an action
for violation of their rights. As increasing the cost to
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business, supporters contend that it is more accurate to state
that the bill will increase the cost of violating established
labor standards.
Author's Technical Amendments . In order to clarify the intent
of the bill and correct drafting errors, the author properly
proposes the following amendments:
On page 3, line 4, to correct a drafting error, the bill should
read:
2699. (a) Notwithstanding any other provision of law, any
provision of this code that provides for a civil penalty to be
assessed and collected by the Labor and Workforce Development
Agency or any of its departments, divisions, commissions,
boards, agencies, or employees, for a violation of this code,
may, as an alternative, be recovered through a civil action
brought by an
aggrieved employee on behalf of himself or herself or and other
current or former employees.
On page 3, lines 9-10, in order to avoid confusing the statute
of limitations with the standing requirement, the bill should
read:
(c) For purposes of this part, ''aggrieved employee'' means any
person who was employed by the alleged violator within the
period of time covered by the applicable statute of limitations
and against whom one or more of the alleged violations was
committed.
On page 3, starting on line 14, to clarify the author's intent,
the bill should read:
(d) For all provisions of this code except those for which a
civil penalty has already been established is specifically
provided, there is established a civil penalty for a violation
of these provisions, as follows:
(1) If, at the time of the alleged violation, the person does
not employ one or more employees, the civil penalty is five
hundred dollars ($500).
(2) If, at the time of the alleged violation, the person employs
one or more employees, the civil
penalty is one hundred dollars ($100) for each aggrieved
employee per pay period for the initial violation and two
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hundred dollars ($200) for each aggrieved employee per pay
period for each
subsequent violation.
On page 3, beginning on line 24, to correct a drafting error and
otherwise more clearly state the author's intention, the bill
should read:
(e) An aggrieved employee may recover the civil penalty
described in subdivision ( b d) in a civil action filed on
behalf of himself or herself and other current or former
employees for whom
evidence of a violation was developed during the trial or during
settlement of the action against whom one or more of the alleged
violations was committed. Any employee who prevails in any
action shall be entitled to an award of reasonable attorney's
fees and costs. Nothing in this section shall operate to limit
an employee's right to pursue other remedies available under
state or federal law, either separately or concurrently with an
action taken under this section.
On page 4, line 1, in order to clarify the author's intention
and improve the operation of the statute, the bill should read:
(f) No action may be maintained under this section by an
aggrieved employee if the agency or any of its departments,
divisions, commissions, boards, agencies, or employees, on the
same facts and theories, cites a person for a violation of the
same section or sections of the Labor Code under which the
aggrieved employee is attempting to recover a civil penalty on
behalf of
himself or herself or others and or initiates a proceeding s to
collect applicable penalties pursuant to section 98.3.
On page 4, line 4, in order to correct a drafting error,
"subdivision (g)" should be changed to "subdivision (h)"
Prior Related Legislation . AB 2985 (Committee on Labor and
Private Employment), Chap. 662, Stats. of 2002, required the
Labor and Workforce Development Agency to contract with an
independent research organization to study the most effective
ways to enforce wage and hour laws and to identify all available
state and federal resources available for enforcement. The
completed study is to be submitted to the Legislature by
December 31, 2003.
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REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation, AFL-CIO (co-sponsor)
California Rural Legal Assistance Foundation (co-sponsor)
American Federation of State, County and Municipal Employees
(AFSCME)
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Independent Public Employees Legislative Council
California State Association of Electrical Workers
California State Pipe Trades Council
California Teamsters Public Affairs Council
Engineers and Scientists of California, Local 20
Hotel Employees, Restaurant Employees International Union
Peace Officers Research Association of California
Professional & Technical Engineers, Local 21
Protection and Advocacy Inc
Region 8 States Council of the United Food and Commercial
Workers
Sierra Club California
Western States Council of Sheet Metal Workers
Opposition
Associated Builders and Contractors of California
Associated General Contractors
Association of California Water Agencies
California Apartment Association
California Association of Sheet Metal and Air Conditioning
Contractors
California Chamber of Commerce
California Employment Law Council
California Landscape Contractors Association
California Manufacturers and Technology Association
California Motor Car Dealers Association
California Restaurant Association
Civil Justice Association of California
Construction Employers Association
Lumber Association of California and Nevada
Orange County Business Council
Analysis Prepared by: Kevin G. Baker / JUD. / (916) 319-2334
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