BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 889 (Ammiano) Hearing Date: 8/25/2011 Amended: 7/12/2011 Consultant: Bob Franzoia Policy Vote: L&IR 5-1 _________________________________________________________________ ____ BILL SUMMARY: AB 889 would regulate the wages, hours, and working conditions of domestic work employees, provide a private right of action for domestic work employees, including liquidated damages, and would provide an overtime compensation rate for domestic work employees. This bill would require domestic work employers of persons engaged in household domestic service to provide employees with information regarding their wages either semimonthly or at the time of each wage payment, and remove an exclusion for domestic work employers to secure workers' compensation coverage for certain employees thereby requiring all employers to secure the payment of workers' compensation. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Elimination of wage andEstimated $385 annually, costs could beSpecial* hour exemptions for significantly higher domestic work employees * Labor Enforcement and Compliance Fund _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED. This bill would enact the Domestic Work Employee Equality, Fairness and Dignity Act to regulate the wages, hours, and working conditions of domestic work employees. This bill would establish specific employment rights for domestic work employees including: - Right to overtime compensation. (Labor Code 510 provides that eight hours of labor constitutes a day's work. Any work in excess of eight hours in one workday AB 889 (Ammiano) Page 1 and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee. Any work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee. In addition, any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee. Nothing in this section requires an employer to combine more than one rate of overtime compensation in order to calculate the amount to be paid to an employee for any hour of overtime work.) - Right to meal and rest periods. - A domestic work employee required to be on duty for 24 hours or more shall have a minimum of eight hours of uninterrupted sleep except in an emergency. - A live-in domestic work employee shall not be required to work more than five days in any one workweek without a day off. Work in excess of this schedule shall be compensated with the appropriate overtime. - A live-in domestic work employee who is not required to be on duty for 24 hours shall have 12 hours free of duty, of which a minimum of eight are for uninterrupted sleep. - Live-in domestic work employees and those who work for more than 24 hours shall be provided sleeping accommodations that are adequate and sanitary. An employer shall pay $50 to the employee for each day the employer violates these provisions. This bill also provides the domestic work employee the option of enforcing a violation by bringing a civil action. Filing an administrative or civil complaint may be done up to three years from the time of the violation. Additionally, a domestic work employee who prevails in a civil action shall be entitled to legal or equitable relief including liquidated (punitive) damages. Staff notes that providing for liquidated damage appears to be unique in Labor Code provisions relating to employees. A domestic work employer shall permit a domestic work employee who works five hours or more to choose the food he or she eats and to prepare his or her own meals. A domestic work employer is required to permit a domestic work employee to use the job site's kitchen facilities and appliances without charge or deduction from pay. AB 889 (Ammiano) Page 2 By one estimate, there are 200,000 domestic work employees in the state. How many employees are employed by the 2,000 home care agencies in the state is unknown. Given the number of domestic work employees whose wages, hours and benefits would be governed by the provisions of this bill and the possible violations, this analysis estimates there will be a major increase in claims to the Division of Labor Standards Enforcement (DLSE) in the Department of Industrial Relations. Some information on possible number of claims can be found in the report, Wage Theft and Workplace Violations in Los Angeles, Institute for Research on Labor and Employment, UCLA 2010. The report noted child care workers (highest at 74.9 percent), garment workers (60.1 percent) and maids and housekeepers (35 percent) had high rates of minimum wage violations. Home health care workers had a violation rate of 20.4 percent. As the report noted, high rates are not surprising since flat weekly or flat daily pay rates, by definition, do not vary with hours worked. The reported noted high overtime, meal break and off-the-clock violation rates (though it does not appear those rates were separated by child care worker, maids and housekeepers, and home health care workers). Staff notes Industrial Welfare Commission Wage Order 15 applies to Household Occupations which is defined as all services related to the care of persons or maintenance of a private household or its premises by an employee of a private householder. Under Wage Order 15, personal attendants are defined as including: babysitters and means any person employed by a private householder or by any third party employer recognized in the health care industry to work in a private household, to supervise, feed, or dress a child or person who by reason of advanced age, physical disability, or mental deficiency needs supervision. Personal attendants are completely exempt from the general overtime requirements, meal and rest break requirements and other provisions of Wage Order 15. Therefore, personal attendants are only required to be paid straight-time for all hours worked, regardless of whether they work more than eight hours in a day or 40 hours in a week. AB 889 (Ammiano) Page 3 In 2010, there were 1,175 DLSE investigations completed and decisions rendered. The Retaliation Complaint Unit has 15 investigators with an average caseload of 78 cases. An investigator in the unit has a Deputy Labor Commissioner I classification I ($4,357 - $5,631, total compensation $76,966 annually). In 2009, the Bureau of Field Enforcement reported 1,766 citations for workers compensation, 71 for minimum wage, and 95 for overtime violations in a variety of industries. For purposes of illustration, if one Deputy Labor Commissioner l could handle 200 claims annually, just 1,000 claims would require five new positions at a cost of $384,830 ($76,966 x 5). Costs could be significantly higher. For example, if one percent of domestic work employees filed a claim, estimated costs would double. As part of the state government trailer bill Chapter 12/2009 (AB 12x4, Evans), the Director of Industrial Relations would be authorized to levy a separate surcharge upon all employers, as defined, for the purposes of deposit in the newly created Labor Enforcement and Compliance Fund. Chapter 12 requires that the total amount of the surcharges be allocated between employers in proportion to payroll respectively paid in the most recent year for which payroll information is available. The surcharge levied shall not exceed $37,000,000 in the 2009-10, adjusted for as appropriate to reconcile any over/under assessments from previous fiscal years, and shall not be adjusted each year thereafter by more than the state-local government deflator*. The cap of $37,000,000 represents the amount expended by the DSLE in 2008-09 for the enforcement of wage and hour violations. Given the potential enforcement costs associated with this bill, it may become necessary to apply the deflator which, to date, has not been applied. Currently, employers of domestic work employees must carry workers' compensation insurance. This bill would remove the exemption from workers compensation for domestic work employees who work less than 52 hours in a 90 day period provided by Labor Code 3352 (h). Some employers (private residence employers) of domestic work employees cover their workers' compensation insurance obligation through homeowner insurance. It appears all domestic work employers could continue to secure workers compensation through homeowner insurance (Insurance Code 11590). If the provisions of this bill required employers of domestic work employees to purchase the workers compensation insurance AB 889 (Ammiano) Page 4 from a state approved workers compensation carrier, this may result in many new policies being purchased at the minimum policy rate. Additionally, all employers will be required to provide specific written workers' compensation information to all employees. It is unclear if employers who hire residential domestic work employees for their household will be sufficiently knowledgeable to provide the required information to avoid penalty situations. (Existing law requires employers furnish employees with an accurate itemized written statement at the time of each payment of wages that shows, among other things, the name of the employee, his or her gross and net wages earned, the total hours worked, and all deductions. Pursuant to Labor Code 226 (d), this requirement does not apply to any employer of a person employed by the owner of a residential dwelling under specified conditions including duties incidental to the ownership of the dwelling and not in the course of the business of the employer. This bill would remove that exemption and require that an employer shall pay $50 to the employee for each day the employer violates this section.) The current State Compensation Insurance Fund (SCIF) rate for a private residence employee classification is $2,050 (per employee per year). This assumes minimum wage of $16,640 annually and no overtime. If a private residence employer determines that the provisions of this bill make the hiring of three full time employees as more cost effective and reduces or eliminates potential violations for rest periods, meal periods, etc., the private residence employer's workers' compensation rate could increase to $6,150 for the private residence employee classification. These rates for an employer of five full time (minimum wage) employees would increase to $10,250. If greater that minimum wage is paid, or overtime is paid, to domestic work employee, there would be much greater divergence between the private residence employee classification and the other classifications. If the employer were to go to an outsourcing agency for domestic help, the homemaker services classification ($2,329 - $14.00 per $100 of payroll) or the building operation classification ($3,204) would most likely apply. By one estimate, half of all domestic work employees are on duty for 24 hours. While it is difficult to estimate how employer may respond to the provisions of this bill, it would appear AB 889 (Ammiano) Page 5 every such arrangement, where there is no sleep agreement, will necessitate the hiring of a second employee. Employers may determine that three eight hour employees is the appropriate option, which may decrease wage compensation for some employees. It may increase compensation for some employees. For a homeowner with one employee (under this bill if that employee is providing 24 hour care without a sleep agreement), that employee could receive generally a minimum compensation of $8 for 8 hours, $12 for 4 hours and $16 for 12 hours for a total of $256, an increase of $64 a day over straight minimum wage. For all other employers, the impact is unclear. Would the provisions of this bill, force employers (private residence employers, home care agencies, etc.) "underground" or would the existence of clear monetary penalties and potential civil action increase compliance and reduce violations. Penalties could alter the way employers schedule employee meal and sleep periods and respond to emergency situations. If a homecare agency can hire sufficient employees, the agency will have to balance potentially lower employee compensation costs against significant higher workers' compensation and unemployment insurance costs and possible litigation costs. The proposed amendments would: - Exempt licensed child care providers from the bill. - Make a non-substantive change to Labor Code 1454. This amendment would clarify the intent of the bill that Labor Code 510 governs overtime, rather than Wage Order provisions that exempt Personal Attendants and Live in workers from the usual overtime rules.