BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2772
                                                                  Page  1

          Date of Hearing:   May 5, 2010

                                Sandre Swanson, Chair
                AB 2772 (Labor Committee) - As Amended:  April 8, 2010
          SUBJECT  :   Labor Commissioner: appeals.

           SUMMARY  :   Clarifies that an employer wishing to appeal a Labor  
          Commissioner (LC) decision with the superior court must first  
          post a bond in the amount of the judgment rendered in the  
          administrative hearing.

           EXISTING LAW  :

          1 Authorizes the LC to investigate employee complaints and hold  
            administrative hearings to decide disputes over unpaid wages  
            and other related issues between employers and employees.

          2)Permits a party to appeal an order, decision or award of the  
            LC within ten days by filing an appeal to the superior court,  
            where the appeal will be heard de novo.

          3)Provides that whenever an employer files an appeal with the  
            superior court, the employer shall post a bond with the court  
            in the amount of the judgment rendered in the administrative  

           FISCAL EFFECT  :   This bill is currently keyed non-fiscal.

           COMMENTS  :   This bill is sponsored by the California Rural Legal  
          Assistance Foundation (CRLAF) and is intended to restore the  
          original intent of legislation enacted in 2000 related to  
          employer appeals of LC administrative decisions.

           Brief Background on Labor Code Section 98.2 and AB 2509  

          Existing law authorizes employees (in lieu of filing a civil  
          proceeding) to file an administrative claim for unpaid wages or  
          similar damages with the LC.  This is an administrative  
          adjudicatory process often referred to as the "Berman hearing"  

          Under current law, a losing party may appeal a LC decision to  
          the superior court.  The appeal is heard by the superior court  


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          on a "de novo" basis, meaning the appeal is heard "anew" as if  
          the original hearing had not taken place.

          Prior to 2000, there were complaints by some worker advocates  
          that unscrupulous employers, particularly those in the  
          underground economy, were filing "frivolous" appeals of LC  
          decisions with the superior court in an effort to drag out  
          litigation and hide assets so that workers would not be able to  
          collect on judgments, even if ultimately successful on appeal.

          In response, AB 2509 (Steinberg) of 2000 added the current  
          language to Labor Code section 98.2(b) that specifies that  
          "[w]henever an employer files an appeal pursuant to this  
          section, the employer shall post an undertaking with the  
          reviewing court in the amount of the decision, order, or award."

          The Assembly floor analysis for AB 2509 (for the vote on  
          concurrence in Senate amendments, just preceding the final vote  
          on the bill) stated the following:

               "The remaining provisions include those relating to: ....  
          requiring an undertaking
                prior  to an appeal of a final wage order ...." (Emphasis  
           The Progressive Concrete Decision  

          Despite the legislative history of AB 2509, in 2006 a California  
          appellate court determined that the requirement of Labor Code  
          section 98.2(b) is merely "directory" (and not "mandatory and  
          jurisdictional.") Progressive Concrete Inc., v. Parker, 136 Cal.  
          App. 4th 540, 548 (2006).

          As a practical matter, this means that when an employer fails to  
          post the required bond, a court may not simply dismiss the  
          appeal, but instead must first issue an order directing the  
          employer to post the bond.  This also means that an employee  
          must generally retain counsel to file a motion for such an  
          order.  If the employer disobeys the court order by failing to  
          post the bond, then the court may dismiss the appeal.

          The court in Progressive Concrete reasoned that a "promptly  
          issued trial court order requiring an appealing employer to post  


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          the undertaking by a certain date would have substantially the  
          same effect and thereby accomplish the same legislative purpose"  
          as permitting the court simply to dismiss an appeal when no bond  
          is posted.  Id. at 548.


          The sponsor of this bill, CRLAF, states that it is intended to  
          clarify that that whenever an employer files an appeal de novo  
          of a LC's adverse Order, Decision or Award (ODA), the employer  
          must first post an undertaking with the reviewing court in the  
          full amount of that ODA.

          CRLAF argues that the Progressive Concrete decision - which is  
          binding on superior courts, state and local agencies, employees,  
          and employers until contradicted by another appellate court or  
          the California Supreme Court - is plainly inconsistent with the  
          clear purpose behind enactment of Section 98.2(b) as part of AB  
          2509 in 2000, which was to ensure that there are sufficient  
          funds available to satisfy a superior court judgment that  
          upholds the original ODA in favor of the employee.

          CRLAF contends that the effect of the appellate court's holding  
          is that, unless a superior court issues an order sua sponte to  
          post the bond (which the decision does not require), an employee  
          would have the burden of filing a motion herself asking the  
          court to order the posting of the bond.  Although the case seems  
          say that in such instances, a court would be required to order  
          posting of the bond, the decision imposes additional expenses  
          and delays on a plaintiff that were never contemplated by the  
          sponsors of AB 2509.  And, it also means, that if a plaintiff  
          doesn't make such a motion (and the court doesn't order it  
          itself), then an unscrupulous employer could lose on appeal but  
          leave the employee with a judgment the employer never intended  
          to pay (and has not posted a bond to cover).  This is precisely  
          the reason why Section 98.2(b) was included in AB 2509: it was  
          in response to unscrupulous employers who were avoiding paying  
          off final LC wage judgments by filing unwarranted, dilatory, and  
          expensive court appeals as a strategy to defeat workers' valid  
          wage claims.

          Bet Tzedek Legal Services points to one of their recent cases as  
          illustrating the problem raised by the Progressive Concrete  
          decision as follows:


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               "In September 2007, the LC awarded a Bet Tzedek client over  
               $80,000 in unpaid wages and penalties for years of work at  
               rates drastically below the minimum wage.  The defendant  
               employer immediately appealed the administrative decision  
               to the Superior Court, but failed to post the required  
               bond.  In order to seek dismissal of the appeal under the  
               process required by Progressive Concrete, Bet Tzedek filed  
               a motion for an order directing the defendant employer to  
               post the bond.  The court granted the motion and set a date  
               by which the employer was required to post the bond.  The  
               employer failed to do so, but repeatedly appeared in court  
               to request more time.  Ultimately, the court set three  
               successive deadlines, requiring three further court  
               hearings, for the employer to post the bond.  When the  
               employer missed the final deadline, the court dismissed the  
               appeal and entered judgment in the amount of the LC award.

               By the time the appeal was dismissed in March 2008, more  
               than six months had passed from the time of the LC award,  
               during which the defendant employer transferred assets and  
               shut down operations of its business."


          Bet Tzedek Legal Services
          California Labor Federation, AFL-CIO
          California Rural Legal Assistance Foundation (sponsor)

          None on file.

          Analysis Prepared by  :    Ben Ebbink / L. & E. / (916) 319-2091