BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: June 22, 2011 2011-2012 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: AB 469
Author: Swanson
Version: As Amended June 14, 2011
SUBJECT
Employees: wages.
KEY ISSUE
Should the Legislature increase penalties and bonding
requirements for the failure to pay the minimum wage and
overtime wages, as well as require the provision of a notice at
the time of hiring that lists the relevant details of a worker's
employment?
PURPOSE
To increase penalties, bonding requirements, and notice
requirements to strengthen existing disincentives to violate
wage law.
ANALYSIS
Existing law 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. (Labor Code §§ 98 & 98.2 and Civil
Code § 3289)
Existing law creates a statute of limitations of 3 years for
wages and 1 year for civil penalties or fees. (Code of Civil
Procedure §§ 338 and 340)
Existing law provides that the failure to pay the minimum wage
as per the Industrial Welfare Commission wage orders as a
misdemeanor. (Labor Code § 1199)
Existing law requires every employer shall, semimonthly or at
the time of each payment of wages, furnish each of his or her
employees, either as a detachable part of the check, draft, or
voucher paying the employee's wages, or separately when wages
are paid by personal check or cash, an accurate itemized
statement in writing. This statement must include, among other
things, gross and net wages earned, hour worked, and any
deductions that were taken. (Labor Code § 226)
Existing law requires that an employer who has been convicted of
a violation of wage law, or if any judgment against an employer
for nonpayment of wages remains unsatisfied for a period of 10
days after the time to appeal therefrom has expired, and no
appeal therefrom is then pending, the Labor Commissioner may
require the employer to deposit a bond in such sum as the Labor
Commissioner may deem sufficient and adequate in the
circumstances, to be approved by the Labor Commissioner. (Labor
Code § 240)
Existing law requires that the bond must be payable to the Labor
Commissioner and is conditioned on the requirement that the
employer, for a definite future period, not exceeding six
months, pay the employees in accordance with the provisions of
this article, and must be further conditioned upon the payment
by the employer of any judgment which may be recovered against
the employer. Failing to provide the bond within 10 days can
lead the Labor Commissioner seeking court action to force the
payment of the bond or force the business to cease operations.
(Labor Code § 240)
Existing law requires that if a court is shown reasonable proof
that an employer, for the second
time within 10 years, has been convicted of violating wage law
or has failed to satisfy a judgment for the nonpayment of wages,
or both, the court may grant a temporary restraining order that
Hearing Date: June 22, 2011 AB 469
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Senate Committee on Labor and Industrial Relations
prohibits the employer within 30 days from conducting any
business within the state, unless the employer deposits a bond
payable to the Labor Commissioner that is conditioned on the
employer making wage payments, or upon satisfaction by the
employer of any judgment for nonpayment of wages, or both.
(Labor Code § 243)
Existing law requires employers to keep, at a central location
in the state or at the plants or establishments at which
employees are employed, payroll records showing the hours worked
daily by and the wages paid to, and the number of piece-rate
units earned by and any applicable piece rate paid to, employees
employed at the respective plants or establishments. These
records shall be kept in accordance with rules established for
this purpose by the commission, but in any case shall be kept on
file for not less than two years . (Labor Code § 1174)
This bill would extend the statute of limitations for penalty
and fee collection for non-payment of wages from 1 year to 3
years from the decision finding the employer liable.
This bill would also provide that if an order by the Labor
Commissioner to post a bond issued against an employer due to
non-payment of wages or for a conviction of violating wage law
remains unsatisfied for a period of 10 days after the time to
appeal therefrom has expired, and no appeal from the order is
then pending, the Labor Commissioner may require the employer to
provide an accounting of assets of the employer, as specified,
and the employer must provide an amended accounting of assets,
if ordered by the Labor Commissioner to do so.
This bill also provides that if the employer fails to provide an
accounting within 10 days, the Labor Commissioner may bring an
action in the name and on behalf of the people of the State of
California against such employer to compel the employer to
furnish the accounting. An employer who fails to provide an
accounting as required by this subdivision shall be subject to a
civil penalty not to exceed ten thousand dollars ($10,000).
This bill would also provide that if an employer is required to
post a bond for a second wage violation in 10 years, the bond
must also be payable for wages, interest on wages and for any
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Senate Committee on Labor and Industrial Relations
damages arising from any violation of orders of the Industrial
Welfare Commission, and for any other monetary relief awarded to
an employee as a result of a violation of this code. To aid in
the enforcement of this section, upon a request by the Labor
Commissioner or an employee bringing an action pursuant to this
section, the court may additionally require the employer to
provide an accounting of assets of the employer, as specified.
Failure to provide this list within 10 days would result in
unspecified sanctions from the court.
This bill would extend the payroll record-keeping requirements
from 2 years to 3 years and explicitly allows an employee to
maintain a personal record of hours worked, or, if paid on a
piece-rate basis, piece-rate units earned.
This bill would provide that, in addition to any other penalty
imposed by law, an employer who willfully violates provisions of
this code or orders of the Industrial Welfare Commission
requiring payment of the legal minimum wage or the legal
overtime compensation applicable to an employee shall be guilty
of a misdemeanor. This bill also provides for restitution in
the amount of the unpaid wages, and civil penalties, upon
conviction, as follows:
a) For unpaid wages of less than $1,000, the fine is not
less than $1,000 nor more than ten thousand dollars
($10,000), or imprisoned in the county jail for not more
than six months, or both the fine and imprisonment for each
offense;
b) For unpaid wages in excess of one thousand dollars
($1,000), the fine is not less than $10,000 nor more than
$20,000, or imprisoned in the county jail for not less than
six months, nor more than one year, or both the fine and
imprisonment, for each offense.
If there are multiple violations of this code or orders of the
Industrial Welfare Commission involving more than one employee,
the total amount of unpaid wages owed to all employees must be
aggregated together for purposes of determining the level of
fine and the term of imprisonment.
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Senate Committee on Labor and Industrial Relations
This bill would also create a misdemeanor and identical penalty
structure for an employer who fails to pay the penalties and
wages due to a wage law violation within 90 days, and that the
employer has the ability to pay said wages and penalties.
This bill would define "willfully" as "ÝI]ntent with which an
act is done or omitted, implies simply a purpose or willingness
to commit the act, or make the omission referred to. It does not
require any intent to violate law, or to injure another, or to
acquire any advantage." This definition is from the Penal Code .
This bill would also require that, at the time of hiring, an
employer must provide each employee, in writing in English and
in the language identified by the employee as his or her primary
language, a notice containing the following information:
1) The rate or rates of pay and basis thereof, whether paid
by the hour, shift, day, week, salary, piece, commission,
or otherwise including any rates for overtime, as
applicable;
2) Allowances, if any, claimed as part of the minimum wage,
including meal or lodging allowances;
3) The regular payday designated by the employer in
accordance with the requirements of this code;
4) The name of the employer, including any "doing business
as" names used by the employer;
5) The physical address of the employer's main office or
principal place of business, and a mailing address, if
different;
6) The telephone number of the employer; and
7) Any other information the Labor Commissioner deems
material and necessary.
This bill also requires the Labor Commissioner to provide a
template for the notice, and minimizes employer liability due to
omissions or errors on the notice, as well as a lack of
Hearing Date: June 22, 2011 AB 469
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Senate Committee on Labor and Industrial Relations
knowledge on the employer's primary language.
COMMENTS
1. Need for this bill?
AB 469, also known as the Wage Theft Prevention Act of 2011,
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.
This bill also seeks to put into effect several policy
suggestions that were put forward by two recent studies on
wage left.
2. Studies on Wage Theft:
In 2008, the Ford Foundation sponsored a survey of 4,387
workers in low-wage industries in the three largest U.S.
cities: Chicago, Los Angeles and New York City. The report of
that survey, titled Broken Laws, Unprotected Workers:
Violations of Employment and Labor Laws in America's Cities,
revealed that 26 percent of workers in the sample were paid
less than the legally required minimum wage the prior work
week, 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.
The study also notes that minimum wage violation rates vary
significantly by industry, and occupation. For example, some
industries, such as apparel and textile manufacturing and
personal and repair services have minimum wage violation rates
that exceed 40 percent, while others, including restaurants,
and retail and grocery stores, have rates of 20 to 25 percent.
However, the study found that undocumented immigrant women
were at the greatest risk of minimum wage violations. The
study estimated that the workers in low-wage industries
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Chicago, Los Angeles, and New York City lose more than $56.4
million per week due to labor law violations.
A follow-up study by the UCLA Institute for Research and Labor
and Employment was published earlier this year, and that study
utilized the data from the 2008 survey, but focused
specifically on Los Angeles County. This study, titled Wage
Theft and Workplace Violations in Los Angeles: The Failure of
Employment and Labor Law for Low-Wage Workers focused on a
survey results of 1,815 workers in Los Angeles County.
This study found similar results to the national survey:
almost 30 percent of the workers sampled were paid less than
the minimum wage in the prior work week, and 63.3 percent of
these workers were underpaid by more than $1 per hour.
Assuming a full-year work schedule, Los Angeles County survey
respondents lost an average of $2,070.00 annually out of total
earnings of $16,536.00. The study estimated that workers in
low-wage industries in Los Angeles County lose more than $26.2
million per week as a result of employment and labor law
violations.
Both of the studies make the same public policy
recommendations to address these issues, which included
strengthening government enforcement of existing employment
and labor laws and stiffening the penalties.
2. Willful Violations and Existing Practice:
As currently written, AB 469 would apply the definition of
"willful" found in the Penal Code, which is used to define
willful intent when committing a crime. As was stated
earlier, AB 469 would create additional misdemeanor provisions
for failing to pay the minimum wage and overtime wages. The
Penal Code definition is as follows:
"ÝI]ntent with which an act is done or omitted, implies simply
a purpose or willingness to commit the act, or make the
omission referred to. It does not require any intent to
violate law, or to injure another, or to acquire any
advantage."
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Senate Committee on Labor and Industrial Relations
The willful definition that is currently in place for failing
to pay former employees was created by case law, Davis v.
Morris (1940), 37 Cal. App. 2d 269, and was reiterated in the
California Code of Regulations. It is:
A willful failure to pay wages within the meaning of Labor
Code Section 203 occurs when an employer intentionally fails
to pay wages to an employee when those wages are due. However,
a good faith dispute that any wages are due will preclude
imposition of waiting time penalties under Section 203.
A 'good faith dispute' that any wages are due occurs when an
employer presents a defense, based in law or fact, which, if
successful, would preclude any recovery on the part of the
employee. The fact that a defense is ultimately unsuccessful
will not preclude a finding that a good faith dispute did
exist. Defenses presented which, under all the circumstances,
are unsupported by any evidence, are unreasonable, or are
presented in bad faith, will preclude a finding of a 'good
faith dispute'. (8 C.C.R. § 13520) (Emphasis added)
3. Possible Amendments:
As discussed above, AB 469 creates a misdemeanor for failing
to pay the minimum wage and overtime. In Labor Code § 1199,
however, provides a misdemeanor for violations of the minimum
wage set by Industrial Welfare Commission wage orders, as well
as violations of the chapter which contains the statutory
minimum wage increases, though not the 8 hour day provisions
found in § 510, which was passed in 1999.
In light of the current funding status of the Industrial
Welfare Commission, as well as the amendments to the Labor
Code over the past 14 years, the Committee may wish to
encourage the author to clarify the relationship between the
existing § 1199 and AB 469's § 1197.2 in order to avoid
conflicting and duplicative misdemeanors for the same wage
violations.
4. Proponent Arguments :
This bill is co-sponsored by the California Labor Federation,
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Senate Committee on Labor and Industrial Relations
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 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 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. 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.
5. Opponent Arguments :
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" as defined as "may expose
employers who may make an honest mistake in calculating
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Senate Committee on Labor and Industrial Relations
overtime rates or wages due to criminally prosecutions 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 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.
6. 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
in his veto message that he felt that existing law is
sufficient.
SUPPORT
California Labor Federation (Sponsor)
California Rural Legal Assistance Foundation (Sponsor)
Young Workers United (Sponsor)
Alameda Labor Council, AFL-CIO
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
California Nurses Association
California Teamsters Public Affairs Council
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Senate Committee on Labor and Industrial Relations
Centro Legal de la Raza
Coalition for Humane Immigrant Rights of Los Angeles
Engineers and Scientists of California
International Longshore & Warehouse Union
National Association of Working Women
National Lawyers Guild Labor & Employment Committee
Professional & Technical Engineers, Local 21
UNITE HERE!
United Food and Commercial Workers Union, Western States Council
OPPOSITION
Acclimation Insurance Management Services
Allied Managed Care
Associated General Contractors
Association Builders and Contractors of California
California Association for Health Services at Home
California Chamber of Commerce
California Chapter of the American Fence Association
California Employment Law Council (unless amended)
California Farm Bureau Federation
California Fence Contractors' Association
California Independent Grocers Association
California Manufacturers & Technology Association
California Retailers Association
Construction Employers Association
Engineering Contractors' Association
Flasher Barricade Association
Marin Builders' Association
Western Growers Association
Hearing Date: June 22, 2011 AB 469
Consultant: Gideon L. Baum Page 11
Senate Committee on Labor and Industrial Relations