BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 197
                                                                  Page  1


          ASSEMBLY THIRD READING
          AB 197 (Monning)
          As Introduced  January 27, 2011
          Majority vote 

           LABOR & EMPLOYMENT      5-1                                     
           
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          |Ayes:|Swanson, Alejo, Allen,    |     |                          |
          |     |Furutani, Yamada          |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Miller                    |     |                          |
          |     |                          |     |                          |
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           SUMMARY  :  Increases the amount of liquidated damages that may be 
          awarded to an employee when an employer fails to pay minimum 
          wage to two times the wages unlawfully unpaid, plus interest.

           EXISTING FEDERAL LAW  establishes the Fair Labor Standards Act of 
          1938, which sets a federal minimum wage, with specified 
          exceptions. 
           
          EXISTING STATE LAW  :

          1)Sets the minimum wage for all employees in California, with 
            limited exceptions, and prohibits employers, unless specified, 
            from paying less than the state minimum wage.

          2)Establishes the Industrial Wage Commission (IWC) to, among 
            other duties, review the adequacy of the minimum wage every 
            two years.

          3)Permits an individual to sue his or her employer, in a civil 
            action, for liquidated damages in an amount that is equal to 
            the wages unlawfully unpaid, plus interest, when the employer 
            pays that individual less than the minimum wage.  

           FISCAL EFFECT  :  Unknown

           COMMENTS  :  According to the sponsor of this bill, the California 
            Rural Legal Assistance
          Foundation (CRLAF), this bill doubles the amount of liquidated 
            damages that could be assessed








                                                                  AB 197
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          against an employer who fails to pay minimum wages and would 
            bring California into alignment 
          with 10 other states which have recently enacted similar 
            legislation in an effort to deter wage 
          theft in the underground economy.

          CRLAF states this bill is in response to the ongoing 
            underfunding of the Division of Labor
          Standards (DLSE) and that DLSE currently has fewer authorized 
            positions for enforcement staff
          than it had in 1980, which inhibits its ability to find, cite 
            and collect civil penalties for minimum 
          wage violations.

          The author's office points out there is substantial evidence of 
            widespread minimum wage
          violations in California, particularly in the underground 
            economy.  UCLA's 2010 report,  Wage 
          Theft and Workplace Violations in Los Angeles  , found that 29.7% 
            of workers surveyed in Los
          Angeles County were paid below the state minimum wage. 

          The Ford Foundation cited in its 2009 report,  Broken Laws, 
            Unprotected Workers  , that 
          depending on the industry or occupation, between 40% and 60% of 
            workers were not paid the 
          minimum wage.

           PRIOR LEGISLATION  :  AB 1881 (Monning) of 2010 was nearly 
          identical to this bill and was vetoed by Governor 
          Schwarzenegger.  In his veto message he stated in part, "the 
          recoveries and penalties are already available to employees and 
          that there was nothing indicating California's minimum wage law 
          was lacking."

           ARGUMENTS IN SUPPORT  :  Proponents concur with the sponsor of 
          this bill stating that it will bring California into the 
          mainstream with other states that have recently increased 
          damages paid to workers when their employers cheat them out of 
          the state's respective minimum wages.  They state that this bill 
          is a response to the chronic underfunding of the Division of 
          Labor Standards Enforcement (DLSE) which inhibits its ability to 
          detect, cite and collect civil penalties for minimum wage 
          violations, particularly in the underground economy.  They 








                                                                  AB 197
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          assert that DLSE's underfunding also significantly undercuts its 
          ability to collect unpaid wages. 

          The California Teamsters Public Affairs Council, amongst others, 
          argues that under existing law, in a court action to recover 
          wages unpaid for minimum wage, the court may award liquidated 
          damages equal to the amount of unlawfully unpaid wages, plus 
          interest.  They also state this remedy enhancement will promote 
          compliance by California employers with California's minimum 
          wage requirements.

           ARGUMENTS IN OPPOSITION  :   The Civil Justice Association of 
          California, the California Chamber of Commerce, the Western 
          Growers, California Framing Contractors Association, and the 
          California Hotel & Lodging Association, amongst others, strongly 
          oppose this bill stating that the current availability of 
          liquidated damages for minimum wage violations, let alone any 
          expansion of them, is unjustified and oppressive.  They state 
          that liquidated damages are a type of punitive damages that may 
          be awarded in addition to the underpaid wages owed, interest on 
          the underpaid wages and statutory penalties per pay period that 
          employers must pay to make an employee whole.  Finally, they 
          argue that California's employers are already subject to an 
          expansive number of wage and hour laws, regulations and 
          substantial penalties for each.

           
          Analysis Prepared by  :    Lorie Erickson / L. & E. / (916) 
          319-2091 


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