BILL ANALYSIS                                                                                                                                                                                                    




                   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 








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          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.








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          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.









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          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 








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          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 








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          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.