BILL ANALYSIS Ó
AB 469
Page 1
Date of Hearing: April 26, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 469 (Swanson) - As Amended: April 14, 2011
As Proposed to Be Amended
SUBJECT : EMPLOYEES: WAGES
KEY ISSUES :
1)TO DETER MINIMUM WAGE, OVERTIME, AND OTHER VIOLATIONS OF THE
LABOR CODE, WHICH SOME BELIEVE AMOUNT TO "THEFT" OF WAGES,
SHOULD EMPLOYERS BE SUBJECT TO REVISED DISCLOSURE, BOND, AND
RECORD-KEEPING REQUIREMENTS, AS WELL AS SPECIFIED CRIMINAL
PENALTIES?
2)SHOULD AN EMPLOYEE BE ABLE TO RECOVER ATTORNEY'S FEES AND
ASSOCIATED COSTS OF COLLECTION INCURRED BY THE EMPLOYEE TO
ENFORCE A COURT JUDGMENT FOR UNPAID WAGES AGAINST AN EMPLOYER
WHO REFUSES TO SATISFY THE JUDGMENT?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
The author and the groups sponsoring this bill, the California
Labor Federation and California Rural Legal Assistance
Foundation (CRLAF), use the shorthand term "wage theft" to
describe violations of labor law such as failure to pay minimum
wage or overtime pay, requiring "off-the-clock" work for no pay,
stealing employee tips, and not paying final wages due.
According to these proponents of the bill, as demonstrated by
several research studies, these types of violations continue to
negatively impact employees-particularly low wage
employees-across the country, with the result that several
states have recently enacted legislation to combat the problem
of wage theft. Accordingly, this bill seeks to enact the Wage
Theft Prevention Act of 2011, and would make a number of changes
intended to prevent minimum wage, overtime and other violations
of the Labor Code, including provisions to increase criminal
penalties for employers and to aid employees in enforcement of
court judgments for unpaid wages due to them. This bill is
widely supported by labor unions and worker advocates who
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contend that current laws have proven inadequate to deter
unscrupulous conduct that amounts to theft of wages from
employees, particularly from low-income workers who are least
able to protect their own rights. The bill is opposed by Cal
Chamber, the Employment Law Council, and other employer
associations, who generally contend that the bill undeservedly
increases criminal liability for employers, and is unnecessary
given the strict and "onerous" wage and hour laws that already
exist in California. This bill passed the Assembly Labor &
Employment Committee by a 5-1 vote.
SUMMARY : Makes a number of changes intended to prevent minimum
wage, overtime and other violations of the Labor Code, including
provisions to increase criminal penalties and to aid enforcement
of court judgments for unpaid wages. Specifically, this bill ,
among other things:
1)Requires an employer, at the time of hiring, to provide each
employee with a written disclosure in the employee's primary
language that specifies the basic terms of employment,
including the rate of pay, the regular pay day, and the
address and phone number of the employer, and requires the
employer to notify employees in writing of any change to such
terms within seven days of the change.
2)Extends, from six months to two years, the maximum time period
the Labor Commissioner may require deposit of a wage bond by
an employer convicted of wage violations, as specified.
3)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, subject to a civil penalty of up to $10,000 for
failure to comply.
4)Authorizes a court to request an amended accounting of assets,
as specified, in relation to the wage bond required to be
deposited after an employer has been convicted or failed to
satisfy a judgment for nonpayment of wages for a second time
within a 10 year period.
5)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
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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.
6)Establishes similar criminal penalties against an employer who
willfully fails to pay and has the ability to pay a final
court judgment or final order issued by the Labor Commissioner
for all wages due to an employee who has been discharged or
has quit within 90 days the judgment was entered or the order
became final.
7)Provides that, in addition to the above criminal penalties,
the employer shall pay restitution to the aggrieved employee
in an amount equal to the amount of unpaid wages.
8)Authorizes an employee to recover attorneys' fees and costs
incurred to enforce a court judgment for unpaid wages against
an employer who refuses to satisfy the judgment.
9)Clarifies that, notwithstanding any other provision of law,
the Labor Code establishes minimum penalties for failure to
comply with wage-related statutes and regulations.
10)Makes other related changes.
EXISTING LAW :
1)Authorizes the Labor Commissioner to investigate employee
complaints, hold hearings, and make determinations on claims
to recover wages and other demands for compensation. (Labor
Code Section 98. All further statutory references are to this
code unless otherwise stated.)
2)Authorizes the Labor Commissioner to compel an employer to
deposit a wage bond in an amount approved by the Commissioner
and conditioned that the employer shall, for a period of not
more than six months, pay the employers as provided. (Section
240.)
3)Authorizes the court to temporarily enjoin an employer who has
received a second wage conviction or has failed to satisfy a
judgment within 10 years of the employer's first wage
conviction from conducting business within the state, unless
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the employer deposits a wage bond for the greater of
twenty-five thousand dollars or 25 percent of the employers
weekly gross payroll with the court to be held until past due
wages are paid, or until a judgment for nonpayment of wages is
satisfied. (Section 243.)
4)Requires an employer to keep payroll records on file at a
central location or at the location of employment for at least
two years. (Section 1174).
5)Provides that, notwithstanding any agreement to work for a
lesser wage, any employee receiving less than the legal
minimum wage or the legal overtime compensation applicable to
the employee is entitled to recover in a civil action the
unpaid balance of the full amount of this minimum wage or
overtime compensation, including interest thereon, reasonable
attorney's fees, and costs of suit. (Section 1194.)
6)Subjects to civil liability any employer or other person who
pays or causes to be paid to any employee a wage less than the
minimum wage as follows:
a) For any initial violation that is intentionally
committed, $100 for each underpaid employee for each pay
period for which the employee is underpaid.
b) For each subsequent violation for the same offense, $250
for each underpaid employee for each pay period for which
the employee is underpaid, regardless of whether the
initial violation is intentionally committed. (Section
1197.1.)
7)Provides that, with respect to provisions governing wages
paid, hours worked, and working conditions of employees under
Part 4 of Division 2 of the Labor Code, none shall be deemed
to restrict the exercise of local police powers in a more
stringent manner. (Section 1205(b).)
8)Provides that any civil penalty to be assessed and collected
by the Labor and Workforce Development Agency (LWDA) for
violation of the Labor Code may, as an alternative, be
recovered through a civil action brought by an aggrieved
employee or employees, but only after written notice
specifically describing the alleged violation has been given
to LWDA and the employer, and the employer has been given the
chance to cure the alleged violation within 33 calendar days
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of mailing of the notice. If the alleged violation is not
cured within the 33-day period, the employee may commence a
civil action. (Sections 2699 and 2699.3.)
COMMENTS : This bill seeks to enact the Wage Theft Prevention
Act of 2011, and would make a number of changes intended to
prevent minimum wage, overtime and other violations of the Labor
Code, including provisions to increase criminal penalties for
employers and to aid employees in enforcement of court judgments
for unpaid wages due to them.
Need to Combat the Widespread Problem of "Wage Theft". The
author and the groups sponsoring this bill, the California Labor
Federation and California Rural Legal Assistance Foundation
(CRLAF), use the shorthand term "wage theft" to describe
violations of labor law such as failure to pay minimum wage or
overtime pay, requiring "off-the-clock" work for no pay,
stealing employee tips, and not paying final wages due.
According to these proponents of the bill, these types of
violations continue to negatively impact employees-particularly
low wage employees-across the country, with the result that
several states have recently enacted legislation to combat the
problem of wage theft, among them New York, Illinois, and
Wisconsin.
The author and sponsors contend that this bill is needed to
address the real problem of wage theft in California, as
evidenced by a 2010 study conducted by researchers at UCLA. In
that study, the researchers surveyed a sample of over 1,800
workers in California and found that 29.7% of respondents
reported being paid less than the state minimum wage, 15.5%
reported that they were not paid required weekly overtime pay,
and 16.4% reported not receiving the legal wage for daily
overtime work. (Milkman, R., Gonzalez, A., et al. "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).) Other violations
reported by survey respondents include the lack of required
payroll documentation, being paid late, tip stealing, and
employer retaliation.
The UCLA study also found that nonpayment and underpayment of
wages take a heavy monetary toll on workers and their families.
For example, respondents who experienced a pay-based violation
in the previous work week lost an average of $39.81 out of
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average weekly earnings of $318.00 (or 12.5 percent). Assuming
a full-year work schedule, the researchers estimated these
workers lost an average of $2,070.00 annually out of total
earnings of $16,536.00. In addition, the researchers estimated
that, in a given week, 654,914 workers in Los Angeles County
suffer at least one pay-based violation, and that based on this
estimate, front-line workers in low-wage industries likely lose
more than $26.2 million per week as a result of employment and
labor law violations.
The author and sponsors also contend that this bill is needed
because enforcement of California labor laws related to wage
violations is weak and largely ineffective. They note that in
2009, only 216 employers in California were cited by the
Division of Labor Standards Enforcement (DLSE) 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, DLSE found $22,381,286 in wages due, but
recovered only $13,062,164 (or 58% of the total).
This Bill Requires Employers To Provide Written Disclosure of
Basic Terms of Employment. This bill requires an employer to
provide its workers with a written disclosure of the basic terms
of their employment, including the rate of pay, regular pay day,
the name of the employer (including any "doing business as"
names), and other contact information for the employer. This
disclosure must be provided at the time the employee is hired
and within seven days each time any changes are made to these
basic 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.
Bill proponents contend that this disclosure requirement is
necessary to ensure a modest standard of transparency to the
employer-employee relationship, and that compliance is not
onerous because only basic information is required to be
included in the statement, some of which often appears on pay
statements or pay stubs. Opponents counter that the disclosure
requirement is too far-reaching and not necessarily appropriate
for all employers, and may create an additional basis for an
employer to be sued in civil court for technical violations of
the requirement that are essentially harmless.
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Proponents, however, respond that because this measure seeks to
bring additional clarity to the basic terms of a job position,
it may in fact cut down on litigation that might otherwise occur
for disputes over, for example, what rate of pay was agreed upon
between the parties. In any case, the incidence of litigation
over a violation of this disclosure requirement is likely
minimized under Section 2699.3, which provides employers with a
33-day period to cure any breach before an employee is permitted
to bring a civil action for violation of a wage-related statute,
as specified. Any violation, technical or otherwise, would seem
to be easily correctable within the 33-day period.
As Proposed To Be Amended, This Bill Clarifies That The Penalty
For Failure To Pay Final Wages Applies When There Is A Final
Court Judgment Or Final Order Compelling Payment. The author
proposes to amend the bill to clarify that the penalty specified
for willful failure to pay all wages due to an employee who has
been discharged or who has quit ("final wages") applies to the
failure to pay a final court judgment or final order issued by
the Labor Commissioner for those wages. In other words, this
amendment clarifies that the penalty applies only after there is
a final judgment or order settling the dispute over final wages,
thus reducing any confusion about calculation of the amount of
wages owed. The amendments read as follows:
On page 11, line 31, before the word "willfully",
insert "who"
On page 11, line 32, after "pay", insert "a final court
judgment or final order issued by the Labor
Commissioner for"
On page 11, line 34, strike "those wages became due"
and replace with "the judgment was entered or the order
became final".
On page 12, strike lines 9 through 12.
On page 12, line 13, strike "(d)" and insert "(c)"
On page 12, line 15, strike "(e)" and insert "(d)"
As Proposed to Be Amended, This Bill Simply Clarifies that the
Labor Code Provides Only Minimum Penalties for Wage Violations.
The bill as currently in print provides that nothing preempts or
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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. However,
existing law already provides that Labor Code provisions
governing wages paid, hours worked, and working conditions of
employees are not to be deemed to restrict the exercise of local
police powers in a more stringent manner. (Section 1205(b).)
Both supporters and opponents acknowledge that, in fact, some
local jurisdictions (e.g. San Jose) can and have exercised their
authority to enact local wage-related ordinances that provide
for stricter penalties than current state law.
In order to reduce ambiguity about application of this provision
with respect to Section 1205(b), the author has agreed to amend
the bill in Committee to remove this provision. The amendment
is as follows:
On page 12, strike "Nothing in this code" from line 22 and
strike lines 23 through 28.
This Bill Allows Recovery of Attorneys' Fees and Costs to
Enforce a Court Judgment for Unpaid Wages. According to
supporters of the bill, even when workers have succeeded in
obtaining a wage claim judgment in their favor, many find
themselves in the unfortunate situation of having little or no
means to collect that judgment against an employer who refuses
to satisfy the judgment. They note that the Labor Commissioner
does have a wage judgment collection unit, and is authorized to
recover reasonable costs of collections against employers who
refuse to pay.
Recognizing that legal representation is often necessary to
adequately enforce a judgment, this bill seeks to permit
recovery of attorneys' fees and costs incurred by any employee
to enforce a court judgment for unpaid wages. This authority
applies only in cases where 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 at great
potential injustice to the employee.
ARGUMENTS IN SUPPORT : This bill is supported by labor unions
and worker advocates who contend that current law is inadequate
to deter unscrupulous conduct that amounts to theft of wages
from employees, particularly from low-income workers who are
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least able to protect their own rights and can least afford to
be denied wages to which they rightfully earned. The need for
legislative action is summarized neatly by the California Labor
Federation in its letter of support, stating:
Employers have also become more sophisticated at
evading justice. Those who abuse workers' rights have
learned how to stall enforcement actions (while) other
companies can simply wait out the administrative
process until workers give up or are forced to move to
find new work.
Employers who flout basic labor laws have a corrosive
effect on entire industries as well-meaning employers
are forced to lower job standards in order to compete.
In these industries, wage theft is a part of the
business strategy of unscrupulous employers and the
fines for violations, if they are caught, are part of
the cost of business and not a real deterrent to the
crime.
This bill will give prosecutors the tools they need to
go after unscrupulous employers who willfully steal
wages from their employees. The criminal penalties will
create a real deterrent to flagrant labor law
violations. This will send a message to employers that
they can no longer include wage theft as a part of
their business model.
ARGUMENTS IN OPPOSITION : The bill is opposed by Cal Chamber,
the Employment Law Council, and other employer associations, who
generally contend that the bill undeservedly increases criminal
liability for employers, and is unnecessary given the strict and
"onerous" wage and hour laws that already exist in California.
In its letter of opposition, Cal Chamber writes:
AB 469 criminalizes any employer who "willfully fails"
to pay wages due within 90 days of a voluntary or
involuntary termination of employment. 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 AB 469 despite
the fact that such employers had no ill-intent to harm
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the employee. California has some of the most onerous
wage and hour laws in the country, which even the
Division of Labor Standards Enforcement, the state
agency charged with enforcing such laws, and courts do
not always agree regarding the proper interpretation.
See Reynolds v. Bement, 36 Cal.4th 1075, 1088 (2005).
Despite this, AB 469 mandates that employers accurately
apply such laws or face criminal prosecution.
We 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.
PREVIOUS LEGISLATION : AB 2187 (Arambula) of 2009 would have
imposed criminal penalties on employers for willful failure to
pay undisputed wages due within 90 days when having the ability
to pay, as specified. The bill was vetoed by Gov.
Schwarzenegger.
REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation (co-sponsor)
California Rural Legal Assistance Foundation (co-sponsor)
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
California Teamsters Public Affairs Council
California Nurses Association
Centro Legal de la Raza
Engineers and Scientists of California
International Longshore and Warehouse Union
National Day Labor Organizing Network
National Lawyers Guild Labor & Employment Committee
Professional and Technical Engineers, Local 21
United Food and Commercial Workers Union, Western States Council
UNITE HERE!
Young Workers United
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Opposition
Acclamation Insurance Management Services
Allied Managed Care
Associated Builders and Contractors of California
Associated General Contractors
California Association for Health Services at Home
California Chamber of Commerce
California Chapter of the American Fence Association
California Employment Law Council
California Fence Contractors' Association
California Independent Grocers Association
California Manufacturers & Technology Association
California Retailers Association
Engineering Contractors' Association
Flasher Barricade Association
Marin Builders' Association
Western Growers Association
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334