BILL ANALYSIS Ó AB 240 Page 1 Date of Hearing: April 13, 2011 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Sandre Swanson, Chair AB 240 (Bonilla) - As Amended: March 8, 2011 SUBJECT : Compensation recovery actions: liquidated damages. SUMMARY : This bill authorizes the Labor Commissioner to recover liquidated damages for an employee who brings a complaint alleging payment of less than the minimum wage. EXISTING LAW : 1)Establishes the Division of Labor Standards Enforcement (DLSE) within the Department of Industrial Relations (DIR) to enforce minimum labor standards. 2)Creates the Labor Commissioner to serve as the Chief of DLSE and, among other duties, adjudicate wage claims and enforce the Industrial Welfare Commission wage orders. 3)Grants employees the right to file a civil action to recover unpaid minimum wages. a) Entitles employees who file a civil suit to recover liquidated damages in an amount equal to the amount of wages unlawfully unpaid. 4)Affords workers an alternative administrative remedy through the Labor Commissioner to recover unpaid wages. FISCAL EFFECT : Unknown COMMENTS : Under current law, California workers have two avenues to recover unpaid minimum wages. An employee may either file a civil action to recover unpaid wages (CA Labor Code, Section 1194) or the employee may file an administrative complaint with the Labor Commissioner and go through what is known as the "Berman" hearing process (CA Labor Code, Section 98). Through a private right of action under Section 11944 of the state's Labor Code, an employee is entitled to recover the full amount of the unpaid balance of wages, including interest, reasonable AB 240 Page 2 attorney's fees and costs of suit. In addition, Section 1194.2 of the state's Labor Code specifically entitles an aggrieved worker to liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon. In contrast, if an employee uses the administrative process to recover unpaid wages through the "Berman" hearing process, the Labor Commissioner does not have specific authorization to grant liquidated damages for unpaid minimum wages. Under Section 98 of the state's Labor Code, the Labor Commissioner has the authority to recover wages, penalties, and other demands for compensation." State law is silent on the issue of whether an employee can recover liquidated damages through the "Berman" process. According to the author, this bill will provide equity for minimum wage workers that have been victims of wage violation by their employers. The author states that workers who have been victims of minimum wage violations have been particularly unlikely to have a claim sufficient to attract an attorney, pushing these workers to seek relief through the administrative process. The author notes, however, that the inequity in current law has the effect of providing less relief to these minimum wage workers. The author asserts that minimum wage workers deserve the same protections from wage violations as all other employees and this bill establishes equity between wage complain processes by clarifying existing statute to ensure that workers receive the same relief for minimum wage violations, regardless of whether they purse their clams administratively or through the courts. A 2010 report titled, "Wage Theft and Workplace Violations: The Failure of Employment and Labor Las for Low-Wage Workers," (Wage Theft Report) released by the Institute for Research on Labor and Employment at the University of California, Los Angeles, found that 29.7 percent of the Los Angeles workers sampled were paid less than the minimum wage in the work week preceding the survey. The Wage Theft Report notes that 63.3 percent of workers were underpaid by more than $1.00 per hour and the median underpayment was $1.65 per hour. In 2009, the Bureau of Field Enforcement (BFE) conducted a total of 9,053 inspections, resulting in a total of 4,465 citations. According to the BFE's 2009 Annual Report on the Effectiveness AB 240 Page 3 of Bureau of Field Enforcement, there were 113 citations issued to employers for failing to pay the minimum wage. In response to these violations, BFE assessed $393,350 in penalties in 2009, of which they collected $74,035. ARGUMENTS IN SUPPORT : In support, the California Rural Legal Assistance Foundation (CRLAF) writes that this bill brings remedies for minimum wage violations into accord with other Labor Code wage-related protections. CRLAF notes that this bill is consistent with the public policy supporting awards of liquidated damages under other wage-related statues. The Teamsters Public Affairs Council, writing in support of the bill, asserts that this bill will eliminate the current disincentive for aggrieved workers to pursue their claims administratively. In their letter of support, the Women's Employment Rights Clinic of Golden Gate University School of Law, write that they have represented low wage workers for over 17 years, and one of the most difficult things that they encounter is explaining to workers that they cannot seek liquidated damages when they choose to pursue their minimum wage violation claims through the simpler and less costly administrative process established by the state's Labor Code. RELATED AND PRIOR LEGISLATION : AB 448 (Arambula) of 2007 would have allowed employees to recover liquidated damages in complaints brought before the Labor commissioner alleging payment of less than the state minimum wage. This bill was vetoed by the Governor. In his veto message, the Governor wrote that he was concerned that allowing liquidated damages on administrative claims would be harmful to small business. The Governor also stated that he saw no reason to expose employers to additional liabilities when other legal avenues already exist for employees and attorneys who are intent on seeking liquidated damages. REGISTERED SUPPORT / OPPOSITION : Support California Conference Board of the Amalgamated Transit Union California Conference of Machinists AB 240 Page 4 California Employment Lawyers Association California Labor Federation, AFL-CIO California Nurses Association/National Nurses Organizing Committee California Official Court Reporters Association California Rural Legal Assistance Foundation (Sponsor) California Teamsters Public Affairs Council Engineers and Scientist of California Golden Gate University School of Law Women's Employment Rights Clinic International Longshore and Warehouse Union National Lawyers Guild Labor & Employment Committee Professional and Technical Engineers, Local 21 SCOPE, Laborers International Union of North America UNITED HERE! Utility Workers Union of America, Local 132 Worksafe, Inc. Opposition None on file. Analysis Prepared by : Shannon McKinley / L. & E. / (916) 319-2091