BILL ANALYSIS Ó
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
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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