BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 469 (Swanson)
As Amended June 27, 2011
Hearing Date: July 5, 2011
Fiscal: Yes
Urgency: No
TW
SUBJECT
Employees: Wages
DESCRIPTION
This bill would establish the Wage Theft Prevention Act of 2011,
which would provide additional penalties for an employer's
violations of wage laws and authorize the Labor Commissioner to
require an employer's accounting of assets upon failure to pay a
wage claim judgment, as specified. This bill would require
employers to provide written notice to employees at the time of
hire specifying the employee's wage rate, payday, and name and
address of the employer, and an additional notice within seven
days when the wage rate changes unless it is reflected on the
wage statement. This bill also would provide additional
post-judgment penalties, as specified, and an award of
attorney's fees and costs to an employee for post-judgment
enforcement efforts of the wage claim award.
BACKGROUND
Wage theft is a term used to describe labor law violations such
as not paying an employee minimum wages or overtime, not paying
for off-the-clock work, tip stealing, and not paying final
wages. As the author of this bill reports, wage theft is on the
rise and California workers are not being paid money earned.
Several high profile wage theft cases have been reported in
recent years. In February 2009, the Los Angeles city attorney
filed criminal charges against two car wash owners for failing
to pay 250 workers the minimum wage and for denying them legally
required meal and rest breaks. The filing alleged that, in
(more)
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violation of minimum wage laws, workers were paid a flat rate of
$35.00 to $40.00 a day for shifts of more than eight hours, that
their lunch breaks were as little as fifteen minutes a day, that
they received no pay for overtime work, and that no medical care
was provided for lacerations and acid burns caused by the
machinery and chemicals they used on the job. The owners were
charged with failing to pay a total of $450,000.00 in back wages
over five years. (Cathcart, Carwashes Accused of Labor
Violations (Feb. 11, 2009) New York Times
(as of
June 26, 2011).)
A similar lawsuit against a builder employing residential
construction workers in California, Nevada, and Arizona alleged
that the company failed to pay employees for hours they worked,
did not pay legally required overtime or provide breaks, and
kept workers off the clock while they traveled between job sites
and awaited materials. The suit was settled in October 2009,
providing over $242,000.00 in unpaid wages to 85 workers.
(McDonnell, Builder to Settle with 85 Workers in Overtime Case
(Oct. 13, 2009) Los Angeles Times
(as of June 26, 2011).)
The problem is not limited to small businesses like car washes
or garment subcontractors. In 2008, Wal-Mart announced a
settlement of sixty-three cases in forty-two states, which
involved charges that the company had forced employees to work
off the clock without pay after their official shifts ended. The
settlement totaled $352 million in unpaid wages and involved
hundreds of thousands of current and former Wal-Mart hourly
employees across the country. In California, a jury ordered
Wal-Mart to pay $172 million for making employees miss meal
breaks. (Associated Press, Wal-Mart Settles Workers' Suit for
$54.25M (Dec. 9, 2008) CBS News (as
of June 26, 2011.)
A recent University of California Los Angeles (UCLA) study found
that an estimated 654,914 workers in L.A. County suffer at least
one pay-based violation every week. Front-line workers in
low-wage industries lose more than $26.2 million per week as a
result of employment and labor law violations. The study noted
the societal ills of wage theft in that "Ýw]age theft not only
depresses the already meager earnings of low-wage workers, it
also adversely impacts their communities and the local economies
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of which they are a 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." (Milkman, González, Narro, Wage Theft and Workplace
Violations in Los Angeles, The Failure of Employment and Labor
Law for Low-Wage Workers (2010) Institute for Research on Labor
and Employment, University of California, Los Angeles
(as
of June 26, 2011), pg. 58.)
This bill contains similar provisions as AB 2187 (Arambula,
2010), which was vetoed by Governor Schwarzenegger.
This bill, co-sponsored by the California Labor Federation,
AFL-CIO and the California Rural Legal Assistance Foundation,
seeks to strengthen labor laws in order to dissuade employers
from wage theft. This bill, among other things, would increase
penalties for an employer's violations of wage laws and
authorize the Labor Commissioner to require an employer's
accounting of assets upon failure to pay a wage claim judgment,
as specified. This bill also would provide additional
post-judgment penalties, as specified, and an award of
attorney's fees and costs to an employee for post-judgment
enforcement efforts of the wage claim award.
This bill was heard by the Senate Labor and Industrial Relations
Committee on June 22, 2011 and passed out on a vote of 5-1.
CHANGES TO EXISTING LAW
1. Existing law authorizes an employee receiving less than
the legal minimum wage or legal overtime compensation to
recover in a civil action the unpaid balance of the full
amount of the minimum wage or overtime compensation, including
interest, reasonable attorney's fees and costs, liquidated
damages. (Lab. Code Sec. 1194, 1194.2.)
This bill would authorize an employee to recovery attorney's
fees and costs incurred to enforce a court judgment for unpaid
wages.
2. Existing law provides the Labor Commissioner authority to
investigate, conduct a hearing, and adjudicate employee wage
complaints, as specified. (Lab. Code Secs. 96 and 98.)
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This bill would require a party who has received notice of a
Labor Commissioner hearing to notify the Labor Commissioner in
writing of any change of business or personal address within
10 days after the change of address occurs.
This bill also would authorize the Division of Labor Standards
Enforcement to commence an action in a superior court to
collect a civil penalty, fee, or penalty fee within three
years of the date the penalty or fee became final, as
specified. This bill would direct the clerk of the superior
court, upon commencement of the action, to immediately enter
judgment in conformity with the action.
3. Existing law provides that, if the employer has been
convicted of a wage violation or if any judgment against the
employer remains unpaid after ten days, the Labor Commissioner
may require the employer to post a bond, as specified. (Lab.
Code Sec. 240.)
This bill would authorize the Labor Commissioner to require
the employer to provide an accounting of assets, as specified,
if the employer fails to post a bond ten days after the time
to appeal and no appeal from the bond order is pending.
This bill would provide civil penalties not to exceed $10,000
for failing to provide an accounting.
4. Existing law provides that if an employer is convicted of a
labor violation or has failed to satisfy a judgment for
nonpayment of wages, or both, and the employer is alleged to
have been convicted of a second labor violation within ten
years, the employee can bring an action in a civil court and
apply for a temporary restraining order prohibiting the
employer from doing business in the state for 30 days, unless
the employer deposits a bond with the court, as specified.
(Lab. Code Sec. 243.)
This bill would provide that the employer's bond shall also be
payable for wages, interest on wages, and for any damages or
any other monetary relief awarded to the employee.
This bill would authorize the court to require the employer to
provide an accounting of the employer's assets, as specified.
5. Existing law requires an employer to maintain payroll records,
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as specified, for at least two years. (Lab. Code Sec. 1174.)
This bill would increase the time to maintain payroll records
from two to three years.
This bill would provide that an employer shall not prohibit an
employee from maintaining a personal record of hours work or
piece-rate units earned.
6. Existing law authorizes the Labor Commissioner to issue a
citation, as specified, to the employer and provides the
following civil penalties against an employer who pays or
causes to be paid to any employee wages less than the legal
minimum wage:
for any initial violation that is intentionally
committed, $100 for each underpaid employee for each pay
period for which the employee is underpaid; and
for each subsequent violation for the same specific
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.
(Lab. Code Sec. 1197.1.)
This bill would provide penalties as follows 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, as specified:
if the total amount of wages due is less than $1,000,
the employer shall be fined not less than $1,000 but not
more than $10,000 or imprisoned in the county jail for not
more than six months, for each offense;
if the total amount of wages due is more than $1,000,
the employer shall be fined not less than $10,000 but not
more than $20,000, or imprisoned in the county jail for six
months to one year, or both, for each offense; and
if there are multiple failures to pay wages involving
more than one employee, the total amount of wages due to
all employees shall be aggregated together for purposes of
determining the level of fine and the term of imprisonment.
This bill also would declare that the penalties levied against
an employer for failing to comply with wage-related statutes
and regulations are the minimum penalties.
7. Existing law requires an employer to provide in writing to an
employee certain benefit disclosures. (Lab Code Sec. 2800 et
seq.)
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This bill would require an employer to providing in writing,
in English and in the language identified by the employee as
his or her primary language, to an employee a notice
including, among other things, the rates of pay and basis
thereof, as specified, allowances, the regular payday, the
name and physical address of the employer. This bill would
require the Labor Commissioner to prepare templates that
comply with these requirements, as specified.
8. Existing law requires an employer, semimonthly or at the time
of each payment of wages, furnish, as specified, to provide to
an employee an itemized statement in writing including, among
other things, the gross and net wages earned, total hours
worked by the employee, all deductions, the pay period dates,
and the name and address of the employer. Existing law
requires the employer to maintain a copy of the statement for
at least three years at the place of employment or at a
central location within the state. (Lab. Code Sec. 226.)
This bill would make technical changes to this statute.
COMMENT
1. Stated need for the bill
The author writes:
AB 469 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). AB 469 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 California Labor Federation, AFL-CIO writes:
There are increasing reports of the illegal "theft of wages" -
a term describing labor law violations such as not paying
minimum wage or overtime, off-the-clock work, tip stealing,
and not paying final wages. . . . Wage theft has become
increasingly widespread in part because of the lack of
meaningful enforcement of labor laws. . . . Employers who
flout basic labor law put well-meaning employers at a
competitive disadvantage. Enforcement is weak and fines are
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low, so wage theft is a part of the business strategy of
unscrupulous employers.
2. Increasing penalties and providing additional enforcement
methods for violations of wage laws
This bill would establish the Wage Theft Prevention Act of 2011,
which would provide additional penalties for an employer's
willful failure to pay on a judgment, as specified, and
authorize the Labor Commissioner to require an employer's
accounting of assets upon failure to pay a wage claim judgment,
with a $10,000 civil penalty for failing to provide such
accounting. Existing law provides civil penalties of $100 for
each underpaid employee and $250 for each underpaid employee for
each subsequent violation of the same offense against an
employer who pays or causes to be paid to any employee wages
less than the legal minimum wage. (Lab. Code Sec. 1197.1.)
Existing law provides that, if the employer has been convicted
of a wage violation or if any judgment against the employer
remains unpaid after ten days, the Labor Commissioner may
require the employer to post a bond, as specified. (Lab. Code
Sec. 240.)
According to a 2010 UCLA study, 29.7 percent of the more than
1,800 workers surveyed received less than the minimum wage, and
79.2 percent were not paid the legally required overtime rate.
(Milkman, González, Narro, Wage Theft and Workplace Violations
in Los Angeles, The Failure of Employment and Labor Law for
Low-Wage Workers (2010) Institute for Research on Labor and
Employment, University of California, Los Angeles
(as
of June 26, 2011), pg. 30.) This study highlights one wage
theft story in particular. "Claudia worked as a sewing machine
operator in a garment shop in downtown Los Angeles. She was
there from 6:00 a.m. to 8:00 p.m., five days a week. She was
paid a piece rate of 14 to 16 cents for each item she sewed, and
she typically earned around $200.00 a week - well below the
minimum wage. At the end of one week, on what was usually
payday," her employer told her that he could not pay her for
that week's work, and four weeks later, after receiving no wages
for one month, the employer skipped town leaving all of the
employees without compensation for the entire month. (Id. at
pg. 33.)
Proponents of this bill argue that existing laws providing
employees, especially low wage workers such as day laborers, car
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washers, and garment workers, with the ability to bring wage
claims against employers are insufficient because employers are
working the system through appeals or avoiding enforcement by
declaring bankruptcy or closing shop and reopening companies
under new names. Further, Young Workers United, a supporter of
this bill, argues that "Ýe]mployers who flout basic labor law
have a corrosive effect on entire industries, as other employers
are forced to lower job standards in order to compete. In these
industries, employers consider fines for labor law violations as
part of the cost of doing business and end up as less expensive
than paying the legal minimum wage or overtime." In addition to
existing penalties for wage violations, this bill would provide
additional penalties against an employer who willfully fails to
satisfy a wage claim judgment when the employer has the ability
to pay the judgment. This bill, upon the employer's failure to
pay the judgment or post bond, also would allow the Labor
Commissioner to require the employer to provide an accounting of
the employer's assets and provide a $10,000 civil penalty for
failing to provide this accounting.
3. Post-judgment attorneys' fees
This bill would provide an award of attorney's fees and costs to
an employee for post-judgment enforcement efforts of the wage
claim award. Existing law authorizes an employee receiving less
than the legal minimum wage or legal overtime compensation to
recover in a civil action the unpaid balance of the full amount
of the minimum wage or overtime compensation, including
interest, reasonable attorney's fees and costs, liquidated
damages. (Lab. Code Secs. 1194, 1194.2)
The California Labor Federation argues that "Ýe]mployers have .
. . become more sophisticated at evading justice. Those who
abuse workers' rights have learned how to stall enforcement
actions through frivolous appeals and how to prevent any
recovery for workers by declaring bankruptcy and re-opening
their companies under new names. Other companies can simply
wait out the administrative process until workers give up or are
forced to move to find new work." Because employers are
well-versed in ways to avoid paying wage claim judgments to
employees, it can be extremely difficult to satisfy the judgment
and collect the long-awaited wages. Accordingly, this bill
would allow a court to award to an employee attorney's fees and
costs incurred to enforce a court judgment.
4. Wage rate disclosure requirements
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This bill would require employers to provide written notice to
employees at the time of hire specifying the employee's wage
rate, payday, and name and address of the employer, and an
additional notice within seven days when the wage rate changes
unless it is reflected on the wage statement. Existing law
requires an employer, semimonthly or at the time of each payment
of wages, furnish, as specified, to provide to an employee an
itemized statement in writing including, among other things, the
gross and net wages earned, total hours worked by the employee,
all deductions, the pay period dates, and the name and address
of the employer. (Lab. Code Sec. 226.)
The California Nurses Association, a supporter of this bill,
argues that this bill will help "prevent some of the worst
abuses of workers by giving workers the information they need to
protect themselves. . . . The bill will require employers to
give basic information to workers when they are hired covering
their wages and working conditions as well as the location and
'doing business as' names of the business. This allows workers
to find their employer when they do want to file a claim."
The California Employment Law Council (CELC), an opponent of
this bill, argues that while the written requirements under this
bill "may be a good idea in certain circumstances, we are not
convinced that such a far-reaching obligation is now appropriate
for every employer, public and private, in California."
Further, opponents contend that this requirement may create an
additional basis for an employer to be sued in civil court for
technical violations of the requirement. In response, the
author argues that this bill seeks to bring additional clarity
to the basic terms of a job position and may, in fact, cut down
on litigation that might otherwise occur for wage disputes.
Further, Labor Code Section 2699.3 provides employers with a
33-day time to cure any breach before an employee can bring a
wage claim, as specified. Accordingly, the employer could
easily correct any technical violations within this time frame
and avoid litigation. Additionally, the author argues that the
notice requirement in this bill was narrowed to apply only to
hourly paid, rank-and-file employees.
CELC also argues that the new disclosure requirements under this
bill are unnecessary because they overlap with the disclosure
requirements for paystubs under Labor Code Section 226. In
response, the author argues that providing, among other things,
the wage rates and employer contact information on the first day
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the employee is hired helps the employee determine whether the
paystubs reflect the wage agreement between the employer and
employee. This bill, by requiring the employer to provide wage
rate and employer contact information on the first day of
employment, would increase the employee's ability to verify a
wage violation and help the employee locate the individuals
responsible for the wage violation.
5. Oppositions' concerns regarding additional civil and criminal
penalties for failing to pay proper wages
Employer groups were opposed to the prior version of this bill
because it created civil and criminal penalties for "willful"
wage violations, without defining the intent required to violate
a wage law. Accordingly, some employers that may have had no
ill-intent to harm the employee could be facing these penalties.
In order to address these concerns, the author amended this
bill to remove civil and criminal penalties for willfully
failing to pay lawful wages. The Construction Employers'
Association has stated that this amendment removes their
opposition. CELC is no longer opposed to this provision, but
continues to be opposed to other provisions of this bill.
6. Governor Schwarzenegger's veto of AB 2187
This bill is substantially similar to AB 2187 (Arambula, 2010).
In vetoing AB 2187, Governor Schwarzenegger stated:
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.
Support : 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; Centro Legal de la Raza; Engineers and
Scientists of California; International Longshore & Warehouse
Union; 9 to 5 California; National Lawyers Guild Labor &
Employment Committee; Professional & Technical Engineers, Local
21; UNITE HERE!; United Food and Commercial Workers Union,
Western States Council; Young Workers United
Opposition : Acclamation Insurance Management Services; Allied
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Managed Care; Associated Builders and Contractors of California;
Associated General Contractors; California Association for
Health Services at Home; California Chapter of the American
Fence Association; California Chamber of Commerce; 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
HISTORY
Source : California Labor Federation, AFL-CIO; California Rural
Legal Assistance Foundation
Related Pending Legislation : AB 240 (Bonilla, 2011), among
other things, would clarify that a Labor Commissioner could
investigate, conduct a hearing, and adjudicate an employee's
claims for liquidated damages relating to a wage claim. AB 240
is currently on the Senate Floor.
Prior Legislation : AB 2187 (Arambula, 2010) See Background.
Prior Vote :
Senate Labor and Industrial Relations Committee (Ayes 5, Noes 1)
Assembly Floor (Ayes 50, Noes 25)
Assembly Appropriations Committee (Ayes 12, Noes 5)
Assembly Judiciary Committee (Ayes 6, Noes 3)
Assembly Labor and Employment Committee (Ayes 5, Noes 1)
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