BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 240| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 240 Author: Bonilla (D) Amended: 6/2/11 in Senate Vote: 21 SENATE LABOR & INDUSTRIAL REL. COMMITTEE : 4-2, 6/8/11 AYES: Lieu, DeSaulnier, Leno, Yee NOES: Wyland, Runner NO VOTE RECORDED: Padilla ASSEMBLY FLOOR: 50-22, 5/5/11 - See last page for vote SUBJECT : Compensation recovery actions: liquidated damages SOURCE : California Rural Legal Assistance Foundation DIGEST : 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, and 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 Commissioner may, in its discretion, refuse to award liquidated damages or award a lesser amount of liquidated damages to the employee. ANALYSIS : CONTINUED AB 240 Page 2 Existing law 1. 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. 2. Establishes the Industrial Wage Commission to, among other duties, review the adequacy of the minimum wage every two years. 3. 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. 4. 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 5. 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. 6. 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. 7. 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 CONTINUED AB 240 Page 3 liquidated damages to the employee. 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, and 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 Commissioner may, in its discretion, refuse to award liquidated damages or award a lesser amount of liquidated damages to the employee. Comments 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 this bill provides 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 CONTINUED AB 240 Page 4 claims through administrative hearings due to the lack of liquidated damages, which this bill seeks to address. 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 6/13/11) California Rural Legal Assistance Foundation (source) California Conference Board of the Amalgamated Transit Union California Conference of Machinists California Labor Federation California Nurses Association California Teamsters Public Affairs Council Engineers and Scientists of California 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 : (Verified 6/13/11) Associated General Contractors 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 CONTINUED AB 240 Page 5 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 ARGUMENTS IN SUPPORT : Supporters of this bill 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. ARGUMENTS IN OPPOSITION : 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. ASSEMBLY FLOOR : AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes, Galgiani, Gatto, Gordon, Hall, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning, Pan, Perea, V. Manuel Pérez, Portantino, Skinner, Solorio, Swanson, Torres, Wieckowski, Williams, Yamada, John A. Pérez NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly, Fletcher, Grove, Hagman, Halderman, Harkey, Jeffries, Knight, Logue, Mansoor, Miller, Morrell, Nestande, Norby, CONTINUED AB 240 Page 6 Olsen, Silva, Smyth, Wagner NO VOTE RECORDED: Cedillo, Furutani, Garrick, Gorell, Jones, Nielsen, Valadao, Vacancy PQ:do 6/13/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED