BILL ANALYSIS Ó AB 469 Page 1 Date of Hearing: May 11, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 469 (Swanson) - As Amended: May 3, 2011 Policy Committee: Labor and Employment Vote: 5-1 Judiciary 6-3 Urgency: No State Mandated Local Program: Yes Reimbursable: Yes SUMMARY This bill establishes the Wage Theft Prevention Act of 2011 (WTPA), which does the following: 1)Establishes criminal penalties against an employer who willfully violates existing law regarding 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, punishable by up to six months in county jail and/or a fine 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 punishable by 16 months, two, or three years in state prison and/or a fine between $10,000 and $20,000. These provisions are in addition to existing penalties. 2)Establishes criminal penalties similar to those referenced above against an employer who willfully fails to pay and has the ability to pay a final court judgment or a final order issued by the Labor Commission (LC) for all wages due to an employee who has been discharged or quit within 90 days of the date the judgment was entered or the order became final, as specified. 3)Requires an employer, at the time of hiring, to provide each employee in writing (English and the primary language of the employee) with a notice of specified information, including the rate of pay, date of pay, any allowances provided to the employee (i.e., meal, lodging). Also, requires the employer to obtain signed acknowledgement from the employee that he or AB 469 Page 2 she received the notice and notify the employee in writing of any change to this information within seven calendar days of the change. 4)Requires the LC to prepare templates for the notice (in English and primary languages) and acknowledgement form referenced above, as specified. FISCAL EFFECT 1)Unknown, costs, likely between $175,000 and $300,000, to the LC to prepare templates and enforce this measure, as specified. 2)Unknown, potentially significant GF state prison costs, likely in excess of $150,000, assuming at least three individuals are convicted of felony. 3)In 2009, the Bureau of Field Enforcement (BFE) reported 216 citations issued to employees for wage and overtime violations. These citations led to $650,550 in penalties and of this amount, $383,723 was collected. The BFE also reported $22.4 million in wages were determined to be owed to employees. Of this amount, $13 million (58%) were paid. SUMMARY, Continued 1)Requires a party who has received notice of a claim before the LC to notify the LC in writing of any change in that party's business or personal address within 10 days after the change occurs. 2)Extends, from six months to two years, the maximum time period the LC 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 appeal time has expired, the LC 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 an employer to recover attorney's fees and costs incurred to enforce a court judgment for unpaid wages. AB 469 Page 3 COMMENTS 1)Background . Existing law establishes misdemeanor criminal penalties for various violations of the Labor Code, including the willful failure to pay wages due. In addition California's Penal Code include penalties for persons who knowingly defraud any other person of money, labor, or property. Notwithstanding any agreement to work for a lesser wage, statute provides that any employee receiving less than the legal minimum wage or the legal overtime compensation is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest on, reasonable attorney's fees, and costs of the suit. Current law provides that any civil penalty assessed by the Labor and Workforce Development Agency (LWDA) for violation of labor statute may, as an alternative, be recovered through a civil action brought by an aggrieved employee. This civil action can only be brought after written notice has been given to LWDA and the employer, and the employer has been afforded the chance to cure the alleged violation within 33 calendar days of mailing of the notice. If the alleged violation is not cured within the 33-day period, the employee may commence a civil action. Statute also authorizes the LC to compel an employer to deposit a wage bond in an amount approved by the LC and conditioned upon the employer paying the employees (for a period not more than six months), as specified. 2)Rationale . The author and sponsors of this measure (California Labor Federation and the California Rural Legal Assistance Foundation) describe labor violation situations as "wage theft." Examples of wage left are failure to pay minimum wage or overtime pay; requiring workers to work with no pay; stealing employee tips; and not paying final wages due. The sponsor's cite an UCLA Institute for Research on Labor and Employment study entitled: Wage Theft and Workplace Violation in Los Angeles: The Failure of Employment and Labor Law for Low-Wage Workers (Ruth, Gonzales, and Narro, 2010) revealed "nearly 30% of low-wage workers were not paid the minimum AB 469 Page 4 wage and 75% of those entitled to overtime did not receive it. The workers most likely to be victims are the ones who can least afford it: day laborers, car wash and garment workers." Proponents also argue other states have passed legislation to address wage theft, including New Mexico (grants treble damages to victims of wage violations); New York (enacted a disclosure law aimed at prevention of wage theft); Maryland (governor established a task force on Workplace Fraud); and Illinois (increased criminal penalties for wage violations). 3)Opposition . Opponents (CalChamber, Associated of General Contractors, California Manufacturers & Technology Association, the California Retailers Association) contend existing statute requires the employer to make the employee whole or impose stiff penalties of varying amounts, if wage statute is violated. They also argue the use of "willful" in terms of violating statute is problematic. Specifically, they state: "The term willful 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 and charged with a felony under Ýthis bill] despite the fact that such employers had no ill-intent to harm the employee." 4)Previous legislation . AB 2187 (Arambula) 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 Governor Schwarzenegger in September 2010 with the following message: "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." Analysis Prepared by : Kimberly Rodriguez / APPR. / (916) AB 469 Page 5 319-2081