BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   AB 240|
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                                 THIRD READING


          Bill No:  AB 240
          Author:   Bonilla (D)
          Amended:  7/11/11 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.

           Senate Floor Amendments  of 7/11/11 double-joint the 
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          overlapping provisions of AB 240 with AB 469 (Swanson).

           ANALYSIS  :    

           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 

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             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.

          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.

          This bill double-joint the overlapping provisions of AB 240 
          with AB 469 (Swanson).

           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 

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          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 
          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  7/12/11)

          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  7/12/11)

          Associated General Contractors
          California Association for Health Services at Home
          California Association of Bed & Breakfast Inns

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          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

           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, 

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            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, 
            Olsen, Silva, Smyth, Wagner
          NO VOTE RECORDED: Cedillo, Furutani, Garrick, Gorell, 
            Jones, Nielsen, Valadao, Vacancy


          PQ:do  7/12/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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