BILL ANALYSIS                                                                                                                                                                                                    






                 Senate Committee on Labor and Industrial Relations
                               Mark DeSaulnier, Chair

          Date of Hearing: June 9, 2010                2009-2010 Regular  
          Session                              
          Consultant: Alma Perez                       Fiscal:No
                                                       Urgency: No
          
                                  Bill No: AB 2772
                 Author: Assembly Committee on Labor and Employment
                         Version: As Amended April 8, 2010 
          

                                       SUBJECT
          
                            Labor Commissioner: appeals. 


                                      KEY ISSUE

          Should an employer wishing to appeal a Labor Commissioner  
          decision with the superior court be required to first post a  
          bond in the amount of the judgment rendered in the  
          administrative hearing? 
          

                                       PURPOSE
          
          To specify that an employer wishing to appeal an administrative  
          judgment must first post a bond. 


                                      ANALYSIS
          
           Existing law  authorizes the Labor Commissioner (LC) to  
          investigate employee complaints and hold administrative hearings  
          to decide disputes over unpaid wages and other issues between  
          employers and employees.  The Labor Commissioner is appointed by  
          the Governor to serve as Chief of the Division of Labor  
          Standards Enforcement (DLSE).  The DLSE and the Office of the  
          Labor Commissioner were established to adjudicate wage claims,  
          investigate discrimination and public works complaints, and  
          enforce Labor Code statutes and Industrial Welfare Commission  
          orders. 

           Existing law  permits a party who loses at an administrative  









          hearing conducted by the Labor Commissioner to file an appeal  
          within ten days in superior court.  An employer filing an appeal  
          with the superior court must post a bond with the court in the  
          amount of the order, decision, or award rendered in the  
          administrative hearing.  The employer is required to provide  
          written notification to the other parties and the Labor  
          Commissioner of the posting of the bond.  

           Under existing law  , the undertaking is posted on the condition  
          that if any judgment is entered in favor of the employee, the  
          employer shall pay the amount owed pursuant to the judgment, and  
          if the appeal is withdrawn or dismissed without entry of  
          judgment, the employer shall pay the amount owed pursuant to the  
          order, decision, or award of the Labor Commissioner unless the  
          parties have executed a settlement agreement for payment of some  
          other amount, in which case the employer shall pay the amount  
          that the employer is obligated to pay under the terms of the  
          settlement agreement.   If the employer fails to pay the amount  
          owed within 10 days of entry of the judgment, dismissal, or  
          withdrawal of the appeal, or the execution of a settlement  
          agreement, a portion of the undertaking equal to the amount  
          owed, or the entire undertaking if the amount owed exceeds the  
          undertaking, is forfeited to the employee.  

           
          This Bill  would expressly state that as a condition to filing an  
          appeal of an administrative judgment, an employer must first  
          post a bond with the reviewing court. 


                                      COMMENTS
          
          1.  Need for this bill?

            Committee has heard of a case in which the Labor Commissioner  
            awarded a client over $80,000.00 in unpaid wages and penalties  
            for years of work at rates below the minimum wage in September  
            2007.  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 currently required (by Progressive  
            Concrete decision - see below), a motion was filed for an  
          Hearing Date:  June 9, 2010                              AB 2772  
          Consultant: Alma Perez                                   Page 2

          Senate Committee on Labor and Industrial Relations 
          








            order directing the defendant employer to post the required  
            bond.  The court granted the motion and set a date by which  
            the employer was required to post the bond.  

            According to the legal services organization representing this  
            case, the employer failed to post the bond, 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 Labor  
            Commissioner award.  By the time the appeal was dismissed in  
            March 2008, more than six months had passed from the time of  
            the Labor Commissioner award.  According to the legal services  
            organization representing this case, during these six months  
            the defendant employer transferred assets and shut down  
            operations of its business.  

            Current law says that whenever an employer files an appeal,  
            the employer shall post an undertaking with the reviewing  
            court; however, current law does not specify when this needs  
            to occur.  This bill is needed to specify that as a condition  
            to filing an appeal with the superior court on a Labor  
            Commissioner decision, an employer must  first  post a bond in  
            the amount of the judgment rendered in the administrative  
            hearing.  

          2.  Background on Labor Code Section 98.2 and AB 2509 (Steinberg)  
            of 2000: 

            Existing law authorizes employees (in lieu of filing a civil  
            proceeding) to file an administrative claim for unpaid wages  
            or similar damages with the Labor Commissioner.  This is an  
            administrative adjudicatory process often referred to as the  
            "Berman hearing" process.  Under current law, a losing party  
            may choose to appeal a Labor Commissioner decision to the  
            superior court.  The appeal is heard by the superior court 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  
          Hearing Date:  June 9, 2010                              AB 2772  
          Consultant: Alma Perez                                   Page 3

          Senate Committee on Labor and Industrial Relations 
          








            underground economy, were filing "frivolous" appeals of Labor  
            Commissioner 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 judgment, 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  
            "Whenever 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?" 

          3.  The Progressive Concrete Decision
           
            Despite the legislative history of AB 2509, in 2006 a  
            California appellate court determined that the requirements of  
            Labor Code section 98.2(b) are 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 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.   
            This bill would specify that an employer wishing to appeal an  
            adverse Labor Commissioner Order, Decision, or Award (ODA)  
          Hearing Date:  June 9, 2010                              AB 2772  
          Consultant: Alma Perez                                   Page 4

          Senate Committee on Labor and Industrial Relations 
          








            must first  post a bond. 

          4.  Proponent Arguments  :
            
            According to the author, Labor Code 98.2(b) was included in  
            AB 2509 (Steinberg) of 2000 in response to unscrupulous  
            employers who were avoiding paying off final Labor  
            Commissioner wage judgments by filing unwarranted, dilatory,  
            and expensive court appeals as a strategy to get workers to  
            walk away from valid wage claims.  According to the author, a  
            recent California appellate court has held that the language  
            in this code section is merely "directory" and that a specific  
            court order is necessary before an employer can be required to  

            post  the undertaking. 

            According proponents, this 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).  Proponents  
            argue that the effect of the appellate court's holding is to  
            leave entirely to the discretion of a court whether or not to  
            issue an order requiring the posting of the bond.  In  
            addition, opponents argue that this ruling has provided an  
            avenue for unscrupulous employers to delay entry of judgment  
            by filing - at no cost - frivolous appeals of Labor  
            Commissioner awards that they have no intention of pursuing. 

            Furthermore, opponents argue that while such appeals may  
            ultimately be dismissed when employers fail to obey a court  
            order to post a bond, the delay has allowed defendants to hide  
            or transfer assets, resulting in uncollectible judgments and  
            no bond to cover the amount.  According to proponents, this is  
            precisely the reason that Section 98.2(b) was included in AB  
            2509 in order to prevent employers from filing frivolous  
            appeals to avoid ever paying valid wage claims.  The author  
            and proponents believe that this bill simply restores the  
            original purpose of AB 2509's employer appeal bond provision  
            to require the posting of the undertaking with the court as a  
            precondition to filing an appeal.  

          Hearing Date:  June 9, 2010                              AB 2772  
          Consultant: Alma Perez                                   Page 5

          Senate Committee on Labor and Industrial Relations 
          








          5.  Opponent Arguments  :

            None received to date. 

          6.  Prior Legislation  :

            AB 2509 (Steinberg) of 2000: Chaptered
            This bill revised statutes relating to the administrative and  
            civil enforcement of wage and hour laws including wage  
            collection and enforcement procedures before the Labor  
            Commissioner.  


                                       SUPPORT
          
          American Federation of State, County and Municipal Employees
          Bet Tzedek Legal Services 
          California Labor Federation, AFL-CIO 
          California Rural Legal Assistance Foundation 

          
                                     OPPOSITION
          
          None received to date. 


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          Hearing Date:  June 9, 2010                              AB 2772  
          Consultant: Alma Perez                                   Page 6

          Senate Committee on Labor and Industrial Relations