BILL ANALYSIS                                                                                                                                                                                                    






                 Senate Committee on Labor and Industrial Relations
                                 Ted W. Lieu, Chair

          Date of Hearing: June 8, 2011                2011-2012 Regular 
          Session                              
          Consultant: Gideon L. Baum                   Fiscal:No
                                                       Urgency: No
          
                                   Bill No: AB 240
                                   Author: Bonilla
                          Version: As Amended June 2, 2011
          

                                       SUBJECT
          
                 Compensation recovery actions: liquidated damages.


                                      KEY ISSUE

          Should the Legislature ensure that employees seeking to recover 
          unpaid minimum wages be entitled to receive liquidated damages 
          whether they file a complaint with the Labor Commissioner or by 
          filing a civil action? 
          

                                       PURPOSE
          
          To provide that workers denied minimum wage payments receive the 
          same relief before the Labor Commissioner as they would receive 
          from the courts.  


                                      ANALYSIS
          
           Existing law  sets a minimum wage for all employees in 
          California, with limited exceptions, and prohibits employers, 
          unless specified, from paying less than the state minimum wage.

           Existing law  establishes the Industrial Wage Commission to, 
          among other duties, review the adequacy of the minimum wage 
          every two years.

           Existing law  provides the Labor Commissioner with the authority 
          to investigate employee complaints and allows the Labor 
          Commissioner to hold a hearing in any action to recover wages, 









          including orders of the Industrial Welfare Commission.  The 
          Labor Commissioner may require an award in the amount of the 
          wages owed, plus interest.  Existing Civil Code sets the 
          interest rate at 10 percent.  (Labor Code  98 & 98.2 and Civil 
          Code  3289)

           Existing law  allows for liquidated damages when construction 
          workers are denied wages from contractors or subcontractors, as 
          well as employees in the garment manufacturing industry.  The 
          liquidated damages owed are equal to the balance of unpaid 
          wages.  (Labor Code  1742.1 & 2673.1)
           
          Existing law  also permits an individual to seek recovery through 
          a civil suit of the unpaid balance of the minimum wage, 
          including interest, attorney fees, and costs of the suit.  
          (Labor Code 1194) 

           Existing law  also requires that if an employee is found to have 
          been paid less than the minimum wage, that employee must be paid 
          liquidated damages in an amount that is equal to the wages 
          unlawfully unpaid, plus interest.  Existing Civil Code sets the 
          interest rate at 10 percent.  (Labor Code 1194.2 and Civil Code 
           3289)

           Existing law  provides that if an employer demonstrates to the 
          satisfaction of the court that the failure to pay the minimum 
          wage was in good faith and that the employer had reasonable 
          grounds for believing that the act or omission was not a 
          violation of minimum wage law or regulations, the court may, in 
          its discretion, refuse to award liquidated damages or award a 
          lesser amount of liquidated damages to the employee.  (Labor 
          Code 1194.2)
           
          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.

           This bill  also provides that if an employer demonstrates to the 
          satisfaction of the Labor Commissioner that the failure to pay 
          the minimum wage was in good faith and that the employer had 
          reasonable grounds for believing that the act or omission was 
          not a violation of minimum wage law or regulations, the Labor 
          Hearing Date:  June 8, 2011                              AB 240 
          Consultant: Gideon L. Baum                               Page 2

          Senate Committee on Labor and Industrial Relations 
          








          Commissioner may, in its discretion, refuse to award liquidated 
          damages or award a lesser amount of liquidated damages to the 
          employee.


                                      COMMENTS

          
          1.  Need for this bill?

            Currently, California workers have two avenues to recover 
            unpaid minimum wages. An employee may either file a civil 
            action to recover unpaid wages or the employee may file an 
            administrative complaint with the Labor Commissioner.  As was 
            discussed above, an employee who waged a successful civil 
            action to receive unpaid minimum wage balances would be 
            entitled to recover the full amount of the unpaid balance of 
            wages, including interest, reasonable attorney's fees and 
            costs of suit.  Liquidated damages could then also be awarded. 
             Additionally, the employee may be able to pursue additional 
            penalties and amounts if the practice was unfair competition

            In contrast, if an employee uses the administrative process to 
            recover unpaid wages through the Labor Commissioner hearing 
            process, the Labor Commissioner does not have specific 
            authorization to grant liquidated damages for unpaid minimum 
            wages.  Under existing law, the Labor Commissioner only has 
            the authority to recover wages, penalties, and other demands 
            for compensation.  

            As such, the author and proponents believe that AB 240 will 
            provide equity for minimum wage workers, as workers who have 
            been victims of minimum wage violations have been unlikely to 
            have a claim sufficient to attract an attorney, pushing these 
            workers to seek relief through the administrative process.  
            Additionally, some supporters have noted that existing law 
            creates a disincentive to pursue claims through administrative 
            hearings due to the lack of liquidated damages, which AB 240 
            seeks to address.


          2.  Proponent Arguments  :
          Hearing Date:  June 8, 2011                              AB 240  
          Consultant: Gideon L. Baum                               Page 3

          Senate Committee on Labor and Industrial Relations 
          








            
            Supporters of AB 240 note that it is the most vulnerable 
            workers in the California workforce who are paid the minimum 
            wage and are most likely to suffer from wage theft.  
            Supporters argue that this bill brings remedies for minimum 
            wage violations into accord with other Labor Code wage-related 
            protections, and that this bill is consistent with the public 
            policy supporting awards of liquidated damages under other 
            wage-related statues.  Moreover, supports also believe that 
            this bill will remove the current disincentive for aggrieved 
            workers to pursue their claims administratively.   

          3.  Opponent Arguments:  

            Opponents of the bill, which includes the California Chamber 
            of Commerce, believes that allowing a deputy Labor 
            Commissioner to award liquidated damages is both unprecedented 
            and unnecessary.  Opponents believe that existing California 
            wage protections are sufficient to protect workers.  Further, 
            opponents believe that California's existing labor laws and 
            regulatory are burdensome and impacts job creation and 
            business expansion and relocation.

          4.  Prior Legislation  :

            AB 448 (Arambula) of 2007, which was nearly identical to this 
            bill, 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 Governor Schwarzenegger. 
           


                                       SUPPORT
          
          CA Conference Board of the Amalgamated Transit Union
          CA Conference of Machinists
          California Labor Federation
          California Nurses Association
          California Rural Legal Assistance Foundation
          California Teamsters Public Affairs Council
          Engineers and Scientists of California
          Hearing Date:  June 8, 2011                              AB 240  
          Consultant: Gideon L. Baum                               Page 4

          Senate Committee on Labor and Industrial Relations 
          








          International Longshore and Warehouse Union
          Professional and Technical Engineers, Local 21
          SCOPE, Laborers International Union of North America
          UNITE HERE
          United Food and Commercial Workers-Western States Conference
          Utility Workers Union of America, Local 132

          


                                     OPPOSITION
          
          California Association for Health Services at Home
          California Association of Bed & Breakfast Inns
          California Chamber of Commerce
          California Chapter of the American Fence Association
          California Farm Bureau Federation
          California Fence Contractors Association
          California Grocers Association
          California Hospital Association
          California Hotel and Lodging Association
          California Independent Grocers Association
          California League of Food Processors
          California Manufacturers & Technology Association
          California Retailers Association
          Engineering Contractors Association
          Flasher Barricade Association
          Marin Builders Association













          Hearing Date:  June 8, 2011                              AB 240  
          Consultant: Gideon L. Baum                               Page 5

          Senate Committee on Labor and Industrial Relations