BILL ANALYSIS Ó
AB 469
Page A
Date of Hearing: April 13, 2011
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Sandre Swanson, Chair
AB 469 (Swanson) - As Amended: April 7, 2011
SUBJECT : Employees: wages.
SUMMARY : Makes a number of changes related to "theft" of
wages, employee wage claims and related provisions.
Specifically, this bill :
1)Requires an employer, at the time of hiring, to provide each
employee with a written disclosure of specified basic job
terms, including the rate of pay, the regular pay day, and the
address and phone number of the employer.
2)Requires the employer to notify employees in writing of any
changes to such terms within seven days of the change.
3)Requires the Labor Commissioner to prepare templates for
employer use in complying with the disclosure requirements.
4)Requires any party that has received notice of a claim before
the Labor Commissioner to notify the Labor Commissioner within
10 days of any change in the party's business or personal
address.
5)Extends the time period the Labor Commissioner may require a
wage bond from a previously convicted employer from not more
than six months to not more than two years.
6)Provides that if an order to post a bond remains unsatisfied
for 10 days after the time to appeal has expired, the Labor
Commissioner may require the employer to provide an accounting
of assets, as specified.
7)Authorizes a court to request a similar accounting of assets,
as specified, in relation to bond requirements of existing law
arising after a second conviction or unsatisfied judgment
within a 10 year period.
8)Extends the time period for which an employer must maintain
pay records from two years to three years.
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9)Specifies that an employer shall not prohibit an employee from
maintaining a personal record of their own hours worked or
piece-rate units earned.
10)Authorizes an employee to recover attorneys' fees and costs
incurred to enforce a court judgment for unpaid wages due.
11)Clarifies that nothing in the Labor Code preempts or limits
any other state or local law that prohibits the same or
similar violations of the law or imposes more severe penalties
or timelines, as specified.
12)Establishes criminal penalties against an employer who
willfully violates provisions of law requirement payment of
the minimum wage or overtime. If the amount of unpaid minimum
or overtime wages is less than $1,000, the bill establishes a
misdemeanor penalty and a fine of between $1,000 and $10,000.
If the amount of unpaid minimum or overtime wages is more than
$1,000, the bill establishes a felony and fine of between
$10,000 and $20,000.
13)Establishes similar criminal penalties against an employer
who willfully fails to pay and has the ability to pay all
wages due to an employee who has been discharged or quits
within 90 days.
14)Provides that an employer found guilty of the aforementioned
crimes shall pay restitution to the aggrieved employee in an
amount equal to the amount of unpaid wages.
15)Specifies that these criminal penalties do not apply if the
employee's entitlement to unpaid wages is disputed by the
employer in a civil action or proceeding by the Labor
Commissioner unless a final judgment is entered in favor of
the employee.
16)Makes other related changes.
FISCAL EFFECT : Unknown
COMMENTS : This bill proposes a number of changes aimed at
preventing or combating the intentional theft of earned wages by
unscrupulous employers. The bill draws on several anti-wage
theft initiatives recently enacted in other states such as New
York, Illinois, Wisconsin and Washington.
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Recent Studies on the Prevalence of "Theft of Wages"
Various recent studies have highlighted concerns about alleged
widespread "theft of wages" in the United States and in
California, particularly in the underground economy.
For example, in 2009 the Ford Foundation sponsored a study<1>
that surveyed 4,387 workers in low-wage industries in the three
largest U.S. cities - Chicago, Los Angeles and New York City.
The study revealed that 26 percent of workers in the sample were
paid less than the legally required minimum wage, and 60 percent
of these workers were underpaid by more than $1 per hour. In
addition, 76 percent of the respondents who worked overtime in
the previous week were not paid the legally required overtime
rate by their employers.
Another study<2> focused on a survey of 1,815 workers in Los
Angeles County. The survey found that low-wage workers in Los
Angeles regularly experience violations of basic laws that
mandate a minimum wage and overtime pay and are frequently
forced to work off the clock or during their breaks. Other
violations documented in the survey include lack of required
payroll documentation, being paid late, tip stealing and
employer retaliation.
The survey also revealed that the various forms of nonpayment
and underpayment of wages take a heavy monetary toll on workers
and their families. Respondents who experienced a pay-based
violation in the previous work week lost an average of $39.81
out of average weekly earnings of $318.00 (or 12.5 percent).
Assuming a full-year work schedule, these workers lost an
average of $2,070.00 annually out of total earnings of
$16,536.00<3>.
The survey estimated that, in a given week, 654,914 workers in
Los Angeles County suffer at least one pay-based violation.
---------------------------
<1> "Broken Laws, Unprotected Workers: Violations of Employment
and Labor Laws in America's Cities." Center for Urban Economic
Development, National Employment Law Project, UCLA Institute for
Research on Labor and Employment (2009).
<2> Milkman, Ruth, Ana Luz Gonzalez and Victor Narro. "Wage
Theft and Workplace Violation in Los Angeles: The Failure of
Employment and Labor Law for Low-Wage Workers." UCLA Institute
for Research on Labor and Employment (2010).
<3> Id . at 4.
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Extrapolating from this figure, front-line workers in low-wage
industries lose more than $26.2 million per week as a result of
employment and labor law violations<4>.
The authors of the report underscored the economic impact of
these violations as follows:
"Wage theft not only depresses the already meager earnings
of low-wage workers,
it also adversely impacts their communities and the local
economies of which they
are part. Low-income families spend the bulk of their
earnings on basic necessities
like food, clothing and housing. Their expenditures
circulate through local economies,
supporting businesses and jobs. Wage theft robs local
communities of this spending
and ultimately limits economic growth<5>."
Both of the aforementioned studies make the following public
policy recommendations to address these issues: (1) strengthen
government enforcement of existing employment and labor laws;
(2) update legal standards; and (3) establish equal status for
immigrants to ensure that they have the full protection and
remedies available under employment and labor laws.
Recent Enforcement Data in California
As a preliminary manner, it is important to note the impact of
the underground economy generally in California. In 2009, the
Economic and Employment Enforcement Coalition (EEEC) stated that
the underground economy in California has been conservatively
estimated to amount to over $6.5 billion in just unreported
taxable wage income every year (California's Tax Gap, 2005
California Legislative Analyst's Office). This $6.5 billion
figure significantly understates the problem given that it does
not fully take into consideration the failure of underground
businesses to fund the unemployment tax program, the workers'
compensation system, employer funded worker safety programs, and
---------------------------
<4> Id . at 53.
<5> Id . at 54.
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similar programs<6>.
The Bureau of Field Enforcement (BOFE) within the Division of
Labor Standards Enforcement (BOFE) investigates complaints and
takes enforcement actions to ensure employees are not being
required or permitted to work under unlawful conditions.
Enforcement action taken by BOFE investigators involves the
enforcement of child labor laws; the requirement of employers to
carry workers' compensation insurance coverage; audits of
payroll records, collection of unpaid minimum wages, overtime,
as well as prevailing and other unpaid wages; the issuance of
civil and criminal citations; the confiscation of illegally
manufactured garments; and injunctive relief to preclude further
violations of the law.
In calendar year 2009 (the most recent year for which data is
available), the BOFE conducted a total of 9,053 inspections,
resulting in a total of 4,465 citations<7>. The largest single
source of violations and citations was the failure to carry
workers' compensation insurance with 2,257 citations in 2009.
In 2009, the BOFE issued 113 citations for minimum wage
violations and 103 citations for overtime violations, or 216
citations for the two categories combined. By comparison, in
2009 the BOFE issued 427 citations to car washes and garment
manufacturers for failure to register and 209 citations for
child labor violations<8>.
In 2006, the BOFE issued only 32 citations for minimum wage
violations and 52 citations for overtime violations<9>.
SPECIFIC CHANGES PROPOSED BY THIS MEASURE :
In light of the enforcement data and other information presented
above, this bill proposes a number of changes aimed at
preventing or combating the intentional theft of earned wages by
unscrupulous employers. The bill draws on several anti-wage
theft initiatives recently enacted in other states such as New
York, Illinois, Wisconsin and Washington.
---------------------------
<6> "Report to the California Joint Legislative Budget Committee
and Director of the California Department of Finance." Economic
and Employment Enforcement Coalition (September 2009).
<7> "2009 Annual Report on the Effectiveness of the Bureau of
Field Enforcement." Department of Industrial Relations (DIR).
<8> Id . at 2.
<9> "2006 Annual Report on the Effectiveness of the Bureau of
Field Enforcement." Department of Industrial Relations (DIR).
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Each of the major changes proposed by this bill will be
discussed in turn below:
Worker Disclosure Requirements
This bill ensures that workers will have a written disclosure of
their basic job terms (such as rate of pay, regular pay day,
employer contact information) at the time of hire and within
seven days of any changes made to these basic job terms.
The bill specifies that the written disclosure shall be in
English and in the primary language identified by the employee.
In addition, the bill directs the Labor Commissioner to prepare
sample templates for use by employers in English and at least
one other language. Moreover, the bill specifies that when an
employee identifies a primary language for which a disclosure
template is not available, the employer need only provide the
English-language disclosure.
Updated Contact Information During Labor Commissioner
Proceedings
While wage claims are pending before the Labor Commissioner, one
or more parties may change their address or location. This can
make it difficult to ensure proper notice and service of
relevant documents and timely adjudication of the wage claims.
Therefore, this bill requires any party who has received notice
of a pending claim to notify the Labor Commissioner in writing
of any changes in that party's business or personal address
within 10 days.
Wage Bond and Asset Accounting Requirements
Under current law, if an employer has been convicted of failing
to pay wages, or if a judgment against an employer remains
unsatisfied for more than 10 days, the Labor Commissioner may
require the employer to deposit a "wage bond." Existing law
specifies that the bond shall be conditioned that the employer
shall pay employees properly for a definite future period not
exceeding six months.
This bill extends this time period to two years.
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In addition, where the order to post the bond remains
unsatisfied, this bill authorizes the Labor Commissioner to
require the employer to provide an accounting of assets, as
specified. An employer who fails to provide such an accounting
shall be subject to a civil penalty not to exceed $10,000.
Current law also provides that if an employer is alleged to have
committed a second violation (within 10 years of a previous
conviction or failing to satisfy a judgment), an action may be
brought for a temporary restraining order prohibiting an
employer from doing business unless they deposit a bond with the
court. The bond is equal to $25,000 or 25 percent of the weekly
gross payroll of the employer, whichever is greater.
This bill would specify that the bond shall be payable for wages
and related claims as a result of a violation of the law. This
bill also authorizes the court to require the employer to
provide an accounting of assets, as specified, similar to the
asset accounting sought by the Labor Commissioner as mentioned
above.
Payroll Records Requirements
Existing law requires en employer to maintain specified payroll
records at a central location for not less than two years.
This bill proposes two changes to existing law. First, the bill
requires these records to be maintained for three, rather than
two, years (in line with the statute of limitations for wage
claims). Second, there have been reports that some employers
have begun to prohibit workers from keeping their own
independent record of hours worked or piece rate units earned
(in order to ensure that the employer is paying them properly).
This bill would prohibit an employer from barring their
employees from keeping such personal records.
Attorneys' Fees and Costs for Enforcing Court Judgments for
Unpaid Wage Claims
Collections of unpaid wage claim judgments has been an issue
that advocates and this Committee have struggled with over the
years. Many workers find themselves in the unfortunate
situation of having a wage claim judgment in their favor, but
little or no means to collect that judgment against an
unscrupulous employer that refuses to pay despite the judgment.
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The Labor Commissioner does have a wage judgment collection
unit, and recent amendments allow the Labor Commissioner to
recover reasonable costs of collections against employers who
refuse to pay.
This bill would simply provide for attorneys' fees and costs
incurred by any worker who is forced to obtain legal
representation to enforce a court judgment for unpaid wages.
Again, this is only for situations in which a wage claim has
been adjudicated and final judgment has been rendered in favor
of the employee, yet the employer still refuses to satisfy the
judgment.
Local Jurisdiction Preemption
Local jurisdictions have in the past (and may in the future)
establish local policies or ordinances that go further than
state law. This provision of the bill simply clarifies that
nothing preempts or limits a local law that prohibits the same
or similar conduct, imposes more severe penalties for failing to
comply with wage-related payment requirements, or has more
accelerated timelines for the payment of wages or penalties.
Criminal Penalty Provisions
The sponsors argue that this measure will appropriately
strengthen the hands of prosecutors who take on theft of wages
cases in the future.
Existing law establishes misdemeanor criminal penalties for
various violations of the Labor Code, including the willful
failure to pay wages due (See, e.g., Labor Code section 216).
However, for the reasons discussed below, the sponsors contend
that these current criminal penalties are inadequate.
Moreover, Penal Code section 532(a) provides as follows:
"Every person who knowingly?defrauds any other person of
money, labor, or
property...and thereby fraudulently gets possession of
money or property, or
obtains the labor or service of another, is punishable in
the same manner and
to the same extent as for larceny of the money or property
so obtained."
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California is one of only a handful of states that includes
"labor" within its definition of theft<10>. Despite this fact,
worker advocates contend that "theft of labor" is rarely, if
ever, prosecuted as a crime. Potential reasons for the lack of
criminal prosecution include, but are not limited to, the
following: (1) an assumption that "theft of labor" is a civil
matter best handled by the Labor Commissioner; (2) the
underreporting of wage theft for a variety of reasons; (3) the
fact that "theft of labor" requires proof of specific intent and
must be proven beyond a reasonable doubt; and (4) heavy caseload
of local prosecutors resulting in prioritization of other cases.
The sponsors note that various provisions of the Labor Code make
it a misdemeanor to fail to comply with wage payment laws.
However, they argue that none of these statutes: 1) impose any
additional criminal sanctions if an unscrupulous employer fails
to pay wages that are due within a reasonable period of time; 2)
impose a significant minimum fine for such misconduct; or 3)
require restitution to the employee of all unpaid wages. In
addition, the sponsors state that various provisions of the
California Constitution and the Penal Code contain "victim's
rights" restitutionary protections including a mandatory
"restitution fine" (for misdemeanor convictions, ranging from
not less than $100 to not more than $1,000) and mandatory "full
restitution" for an injured victim, but in both instances a
court has discretion not to assess any fine or not to order full
restitution if it finds that there are "compelling and
extraordinary" reasons to do so and states them on the record.
This bill establishes criminal penalties against an employer who
willfully violates provisions of law requirement payment of the
minimum wage or overtime. If the amount of unpaid minimum or
overtime wages is less than $1,000, the bill establishes a
misdemeanor penalty and a fine of between $1,000 and $10,000.
If the amount of unpaid minimum or overtime wages is more than
$1,000, the bill establishes a felony and fine of between
$10,000 and $20,000.
In addition, the bill establishes similar criminal penalties
against an employer who willfully fails to pay and has the
ability to pay all wages due to an employee who has been
---------------------------
<10> Rita J. Verga, An Advocate's Toolkit: Using Criminal "Theft
of Service" Laws to Enforce Workers' Right to Be Paid, 8 N.Y.
City L. Rev. 283 (2005) at n. 4.
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discharged or quits within 90 days.
The bill specifies that these criminal penalties do not apply if
the employee's entitlement to unpaid wages is disputed by the
employer in a civil action or proceeding by the Labor
Commissioner unless a final judgment is entered in favor of the
employee. In addition, the bill provides that an employer found
guilty of the aforementioned crimes shall pay restitution to the
aggrieved employee in an amount equal to the amount of unpaid
wages.
ARGUMENTS IN SUPPORT :
This bill is co-sponsored by the California Labor Federation,
AFL-CIO and the California Rural Legal Assistance Foundation.
They contend that this measure is a response to widespread wage
theft in California, and draws on anti-wage theft initiatives
recently enacted in other states (such as New York, Illinois,
Wisconsin and Washington). This bill adapts a number of these
states' new laws to fit California's unique employment
landscape, and proposes common sense solutions to some
significant weaknesses in current state law.
The sponsors note that there is substantial evidence of
widespread theft of wages in California, particularly in the
underground economy. UCLA's 2010 report ("Wage Theft and
Workplace
Violations in Los Angeles") found that 29.7% of the more than
1,800 workers surveyed were paid below the state minimum wage,
15.5% were not paid required weekly overtime pay, and 16.4% did
not receive the legally required wage for daily overtime work.
UCLA also found that roughly 79% of workers were "at risk" of
overtime violations. Similarly, they note that Ford Foundation
sponsored research in 2009 ("Broken Laws, Unprotected Workers")
found that 25.9% of workers surveyed were not paid the minimum
wage.
The sponsors also argue that this bill is needed because
enforcement of California labor laws related to wage violations
is weak and largely ineffective. In 2009, only 216 employers in
the entire state of California were cited by the Division of
Labor Standards Enforcement for violating minimum wage and
overtime laws. DLSE assessed $650,550 in penalties for these
violations but collected only $230,154. During that same year,
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DLSE found $22,381,286 in wages due, but recovered only
$13,062,164. When these results are put in the context of the
billions of dollars stolen in the underground economy, it is
clear they are too feeble to constitute a meaningful deterrent.
Finally, the sponsors note that other states and local
jurisdictions facing widespread non-compliance with wage laws
have also acted to strengthen both criminal and civil laws.
Specifically, they indicate that among the states that have
addressed wage theft in 2009-2010 are: New Mexico, where the
state legislature passed a bill granting treble damages to
victims of wage violations; New York, where the legislature
passed a disclosure law aimed at prevention of wage theft;
Maryland, where the Governor established a task force on
workplace fraud; and Illinois, which increased criminal
penalties for wage violations.
ARGUMENTS IN OPPOSITION :
Opponents argue that this bill criminalizes any employer who
"willfully fails" to pay wages due within 90 days of a voluntary
or involuntary termination of employment. They contend that the
term "willfully" is defined as "a willingness to commit the act"
but does not require intent to violate the law or injure
another. Accordingly, employers who may make an honest mistake
in calculating overtime rates or wages due could be criminally
prosecuted under this bill despite the fact that such employers
had no ill-intent to harm the employee.
Moreover, opponents contend that this bill also seeks to
criminalize officers, agents or employees of the employer for
their "willful failure" to pay wages due to another employee.
The California Supreme Court has stated on numerous occasions,
that an officer or other employee of an employer cannot be held
liable for unpaid wages. Therefore, opponents argue that this
bill would undermine such holdings and subject individual
employees who were merely following the directions of the
employer to liability under this bill.
Opponents also note that many wage and hour lawsuits/complaints
have a statute of limitations of three years, and therefore are
not filed within 90 days. Accordingly, a valid dispute may
exist regarding whether the wages at issue are even owed, but
because the employee has not filed such a claim within 90 days
of his/her discharge, the employer could still be subjected to
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criminal liability under this bill.
Opponents also question the necessity of this bill, since
existing law requires the employer to make the employee whole
and imposes stiff penalties of varying amounts, depending on the
wage dispute at issue, when the employer fails to pay wages due.
Additionally, current criminal laws outlaw theft, which permits
prosecution of ill-intentioned employers who steal money from
their employees.
PRIOR LEGISLATION :
AB 2187 (Arambula) of 2010 would have increased criminal
penalties for an employer's willful failure to pay wages. That
measure was vetoed by Governor Schwarzenegger, who stated the
following in his veto message:
"ÝThis bill] would create a new criminal prohibition
against a person or an employer who, having the ability to
pay, willfully fails to pay all wages to an employee who
has been discharged or who has quit within 90 days of the
date of the wages becoming due. The bill contains an
exemption for instances in which the employee's entitlement
to unpaid wages is disputed by the employer in a civil
action or proceeding by the Labor Commissioner unless there
is a final judgment in favor of the employee.
Waiting time penalties and defined timeframes for the
payment of final wages currently exist in California law,
as do mechanisms for enforcement of these obligations.
Therefore, this bill is unnecessary."
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REGISTERED SUPPORT / OPPOSITION :
Support
California Employment Lawyers Association
California Labor Federation, AFL-CIO (co-sponsor)
California Nurses Association
California Rural Legal Assistance Foundation (co-sponsor)
Centro Legal de la Raza
National Day Labor Organizing Network
National Lawyers Guild Labor & Employment Committee
Young Workers United
Opposition
Acclamation Insurance Management Services
Allied Managed Care
Associated General Contractors
California Association for Health Services at Home
California Chamber of Commerce
California Chapter of the American Fence Association
California Fence Contractors' Association
California Independent Grocers Association
California Manufacturers & Technology Association
California Retailers Association
Engineering Contractors' Association
Flasher Barricade Association
Marin Builders' Association
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091