BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 469
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          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 








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            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.  









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           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 








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            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) 








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