BILL ANALYSIS �
AB 1164
Page 1
Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hern�ndez, Chair
AB 1164 (Lowenthal) - As Proposed to be Amended: May 1, 2013
SUBJECT : Liens: employees and workers.
SUMMARY : Authorizes an employee to record and enforce a wage
lien upon an employer's property, as specified. Specifically,
this bill :
1)Provides that an employee shall have a lien for the full
amount of any wages, other compensation, and related penalties
and damages owed to the employee on the following property:
a) All property of the employer, including any
after-acquired property. However, a lien shall not apply
to the employer's personal residence, except as
specified.
b) The property upon which the employee bestowed labor
for the benefit of the property owner and with the
owner's consent or knowledge that such labor was being
provided. The amount of the lien on this property shall
be equal to the amount of wages, compensation, and
related penalties and damages accrued during the time the
employee bestowed labor on that specific property.
However, the lien would not apply to property bought or
services furnished primarily for personal, family, or
household purposes, including any real property that is
the principal residence of the owner.
1)Specifies that the lien amount shall include unpaid wages,
other compensation, penalties and damages available under the
Labor Code, prejudgment interest, and the costs of filing and
serving the lien. The amount of compensation that may be
claimed as a lien includes all wages agreed to be paid to the
employee, but not less than the amount required by law,
including "employer payments" as described in Labor Code
Section 1773.1. An employee's lien upon personal property
shall be limited to a security interest, as defined.
2)Specifies who shall have standing to bring an action and
provides that the lien authorized by this bill is in addition
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to any other lien rights held by the employee and shall not be
construed to limit these rights.
3)Provides that the lien authorized by this bill shall be
permanently extinguished unless a notice of lien is recorded
and served within one year of the date that the employee
ceased working for the employer. Requires the employee to
commence action to enforce the lien within 180 days of filing
or recording notice of the lien.
4)Requires, with regard to a lien on real property, the employee
to record notice of the lien with the county recorder in the
county in which the property is located, and further requires
the lien to be executed under penalty of perjury and include
specified information.
5)Requires, with regard to a lien on personal property, the
employee to file a notice of lien with the Secretary of State,
as specified, and further requires the notice to be executed
under penalty of perjury and include specified information.
6)Specifies that in order to enforce a lien authorized by this
bill, the employee shall demonstrate in a civil action or in
an administrative proceeding before the Labor Commissioner,
that he or she is owed wages, compensation, or penalties and
damages.
7)Provides that the employee is entitled to court costs and
reasonable attorneys' fees for filing a successful action to
enforce the lien.
EXISTING LAW :
1)Gives mechanics, persons furnishing materials, artisans, and
laborers of every class the right to file a lien upon the
property upon which they have bestowed labor or furnished
material for the value of such labor and material. Requires
the Legislature to provide, by law, for the speedy and
efficient enforcement of such liens. (Article XIV Section 3
of the California Constitution.)
2)Sets forth the obligations, rights, and remedies of those
involved in a construction project with regard to mechanics
liens and generally regulates the conditions under which a
mechanics lien may be enforced. (Civil Code Sec. 8400 et
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seq.)
3)Recognizes prejudgment wage liens against property as a remedy
in certain industries, including agriculture (Civ. Code �
3061.5-3061.6), logging (Civ. Code � 3065), and mining (Civ.
Code � 3060).
4)Permits an employee to file a claim with the Department of
Labor Standards Enforcement for unpaid wages, compensation,
and penalties. Authorizes the State Labor Commissioner to
investigate complaints, hold hearings on a claim, and issue an
appropriate order, decision, or award, and allows either party
to appeal an order, decision, or award made by the
Commissioner to the appropriate civil court. (Labor Code
Sections 98 through 98.2.)
FISCAL EFFECT : Unknown
COMMENTS : According to the author, "California has one of the
highest rates of wage theft in the country" and cites studies
which claim that 30% of low-wage workers in Los Angeles are paid
less than the minimum wage and that 80% are not paid for
overtime. Making matters worse, the author claims, it can take
up to two years to go through the Labor Commissioner or civil
court to file a wage claim. If the business closes or goes
bankrupt before the employee wins his or her case, there is
often nothing left to collect. This bill would, subject to
certain exemptions, permit a worker who has not been paid his or
her wages to file a lien against the employer's real or personal
property, or a property upon which the employee bestowed labor
for the amount of wages or other compensation owed. As proposed
to be amended in this Committee, the lien would not apply to a
personal residence, except where the employee bestowed labor
that benefitted the personal residence of the offending
employer.
The Problem of "Wage Theft"
Various recent studies have highlighted concerns about alleged
widespread "theft of wages" in the United States and in
California, particularly in the underground economy. For
example, in 2009 the Ford Foundation sponsored a study that
surveyed 4,387 workers in low-wage industries in the three
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largest U.S. cities - Chicago, Los Angeles and New York City.
The study revealed that 26 percent of workers in the sample were
paid less than the legally required minimum wage, 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. (Broken Laws, Unprotected Workers:
Violations of Employment and Labor Laws in America's Cities,
Center for Urban Economic Development, National Employment Law
Project, UCLA Institute for Research on Labor and Employment
(2009).)
Another study focused on a survey of 1,815 workers in Los
Angeles County. The survey found that low-wage workers in Los
Angeles regularly experience violations of basic laws that
mandate a minimum wage and overtime pay and are frequently
forced to work off the clock or during their breaks. Other
violations documented in the survey include lack of required
payroll documentation, late payments, stealing tips, and
employer retaliation. (Milkman, Gonzalez and Narro, Wage Theft
and Workplace Violation in Los Angeles: The Failure of
Employment and Labor Law for Low-Wage Workers, UCLA Institute
for Research on Labor and Employment (2010).) The survey also
revealed that the various forms of nonpayment and underpayment
of wages take a heavy monetary toll on workers and their
families. Respondents who experienced a pay-based violation in
the previous work week lost an average of $39.81 out of average
weekly earnings of $318.00 (or 12.5 percent). Assuming a
full-year work schedule, these workers lost an average of
$2,070.00 annually out of total earnings of $16,536.00. The
survey estimated that, in a given week, 654,914 workers in Los
Angeles County suffer at least one pay-based violation.
Extrapolating from this figure, front-line workers in low-wage
industries lose more than $26.2 million per week as a result of
employment and labor law violations.
Effectiveness of Existing Methods of Recovering Unpaid Wages
Under existing law, when an employer fails to pay wages due, the
employee has the right to file a claim against his or her
employer (or former employer) with the Department of Labor
Standards Enforcement (DLSE), which is directed by the State
Labor Commissioner. The Labor Commissioner has jurisdiction
over most private sector employees, except those that are bona
fide independent contractors. In some cases, according to case
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law, the Commissioner does not have jurisdiction over those
working under collective bargaining agreements. Existing law
requires an employee who feels that his or her wages have been
wrongly withheld must go through DLSE and according to
statutorily prescribed procedures. (Labor Code Section 98 et
seq.) After conducting an investigation, the Labor Commissioner
may hold an administrative conference or hearing, or both. If a
party is unhappy with the Commissioner's decision, it can appeal
to the appropriate civil court. (Labor Code Section 98.2.)
However, the author contends that even where a worker wins a
favorable decision, the process of collecting the award is often
difficult and ineffective. Irresponsible employers may have
already hidden their cash assets, declared bankruptcy, or
otherwise become judgment-proof. According to the author, state
agencies simply do not have the resources to collect wages even
where a decision has been rendered in favor of the employee.
Giving employees a "wage lien" - similar to but in many ways
broader than the customary "mechanic's lien" - would provide an
additional and arguably more effective tool for an employee to
recover unpaid wages.
Mechanic's Lien Not Available to Most Workers
In addition to permitting claims to be filed with the DLSE and
Labor Commissioner, the California Constitution gives
"mechanics, persons furnishing materials, artisans, and laborers
of every class the right to file a lien upon the property upon
which they have bestowed labor or furnished material for the
value of such labor and material." To further this end, the
state constitution requires the Legislature to provide, by law,
for the speedy and efficient enforcement of such liens.
Accordingly, provisions of the Civil Code set forth the
obligations, rights, and remedies of those involved in a
construction project. However, the author claims that the
mechanic's lien is inadequate for most workers. For example, it
is generally only available to construction workers (and a few
others specially provided for by statute) and it only allows the
worker to place a lien on the property upon which labor was
bestowed. An employee who performed labor that did not entail
construction or making an improvement to real property - such as
service work, for example - cannot make use of a mechanic's
lien.
Employer's Property Subject to Lien
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As introduced, this bill provided that the employee shall have a
lien against all property of the employer, including any
after-acquired property. The wage lien provided by this bill,
in other words, is not, like a mechanic's lien, a lien against
the improvement made to the property. Rather, it is more akin
to a lien against property for an unpaid debt. However, the
bill has recently been amended to clarify that a lien shall
apply to the employer's principal residence only to the extent
that the employee provided labor to the benefit of that
household or residence.
Property "Upon Which the Employee Bestowed Labor"
As introduced, this bill also allowed the lien to be filed on
the property "upon which the employee bestowed labor."
Therefore, the employee could also place a lien on any property
upon which he or she bestowed labor, even if that property was
not owned by the offending employer. However, as recently
amended, this bill clarifies that a lien could not be recorded
against a personal residence of someone who was not the
offending employer.
Opponents raised strong objections to this particular provision
of the bill. For example, some opponents stated the following:
"[This bill] allows a lien to be filed on any property
where "labor was bestowed," except someone's primary
residence. This means that any person can be held liable
for the alleged unpaid wages of an employer. For example,
a computer technician performing services for various
businesses in a commercial complex could file a lien on the
commercial property for alleged, unpaid wages. A delivery
driver to a retail establishment could file a lien on that
property for alleged wages. The potential examples are
numerous and puts all members of the public at risk of
having their property held hostage for alleged wages that
such individual had absolutely no control over.
Moreover, despite doing nothing wrong, the property owner
would be forced to pay the lien or incur legal costs to
fight the lien. This is an unfair and unprecedented
exposure of liability to impose individuals who are not at
fault."
Considerable concern was also expressed about this provision by
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Members when this bill was heard by the Assembly Judiciary
Committee. In response to this concern, the author has proposed
to amend Section 3000(a)(2) to read, in part, as follows:
"The property upon which the employee bestowed labor for
the benefit of the property owner and with the owner's
consent or knowledge that such labor was provided."
(Emphasis provided).
In addition, the author proposes to amend Section 3000(c) to
include the following additional language:
"The lien described [above] shall not apply to property
bought or services furnished primarily for personal,
family, or household purposes, including any real property
that is the principle residence of the employer."
The bill would also retain language that limits the lien upon
personal property to property subject to a security interest
under the Commercial Code pursuant to the filing of a financial
statement with the Secretary of State.
It was unclear at the time of preparation of this analysis
whether this proposed amendment language addressed the concerns
expressed by opponents and Members regarding this particular
provision of the bill.
Priority and "Super-Priority" Lien Provisions
As introduced, this bill granted a lien precedence over all
other liens, claims, or encumbrances perfected after the date
that the notice of the lien is filed or recorded and makes the
lien effective against the estate of the employer, or any
subsequent purchaser of the property subject to the lien
Moreover, at least as to the first fifty thousand dollars, the
bill provided that the wage lien would take precedence over all
other liens, claims, or encumbrances that were perfected prior
to the filing or recording of the notice of the wage lien.
However, the wage lien would not have super-priority over a tax
lien or other government lien, a purchase money mortgage, or
other liens that arise from the performance of labor, including
a mechanic's lien.
However, following discussion of this issue in the Assembly
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Judiciary Committee, the author has agreed to delete this
language from the bill. Specifically, the author has agreed to
delete Section 3005 from the bill (page 7, lines 16 through 30,
inclusive).
ARGUMENTS IN SUPPORT :
The Wage Justice Center (WJC), one of the bill's co-sponsors,
describes its first-hand experience in the difficulties of
attempting to collect wage judgments. Under existing law, WJC
claims, workers either never recover wages or only recover after
a period of up to two years. And this is true even though they
have been awarded a favorable ruling from the Labor
Commissioner. WJC points out that the concept of a prejudgment
wage lien is not a novel concept, noting that this is afforded
to under current California law for construction workers, farm
workers, and loggers. WJC contends that there is "no
justifiable reason for limiting this right to only these
industries."
The California Federation of Labor (CFL) claims that "one of the
greatest challenges [it faces] is the widespread wage theft
faced by low-wage workers." Not only do studies suggest that
wage theft is becoming more common, CFL claims, but that it has
also "become harder to effectively enforce [wage violations] in
recent years. With the rise of subcontracting and the explosion
in the use of temporary agencies, it has become harder to track
who the real employer is and who to hold accountable." CFL also
contends that businesses in the underground economy have become
more adept at hiding assets, and that state agencies lack
resources to match ever more sophisticated means of evasion. In
support of this contention the CFL cites a 2004 California State
Auditor report which concluded that the Franchise Tax Board was
only able to collect about 20% of the worker wage claims it had
been assigned.
The California Employment Lawyers Association (CELA) supports
this bill for many of the same reasons cited by WJC and CFL, but
it adds that "this bill does not expand government or create new
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wage and hour laws - it enforces what is already on the books.
The wage lien is a proven, simple legal tool that costs the
state next to nothing. It creates no new bureaucracies and no
new agencies with complicated enforcement procedures." Instead,
workers would simply file a notice with either the County
Recorder or the Secretary of State for a fee ranging from $10 to
$30. Like any other prejudgment lien, the wage lien authorized
by this bill merely creates "a temporary hold on employer
property while a worker proves his or her claim for wages owed."
CELA echoes a point made by many other supporters of this
measure by noting that liens are not a new concept, but a
time-honored and time-tested remedy that are already used by
construction workers and farm workers.
Dozens of other labor organizations, policy centers, and
community groups support this bill for the substantially the
same reasons as those noted by WJC, CFL, and CELA.
ARGUMENTS IN OPPOSITION :
[Please note that the following opposition arguments may not
reflect some of the amendments proposed to be taken to this bill
in committee.]
The California Employment Law Council (CELC) opposes this bill,
claiming that it will "permit employees to tie up employers'
real and personal property over a slight dispute over unpaid
wages" and "will have a devastating effect on the ability of
employers to conduct business." CELC argues that while the bill
appears to be patterned to some degree on the existing
mechanic's lien law, "the differences between the
long-established mechanic's lien and AB 1164 are enormous. The
mechanic's lien law applies to a narrow class of workers who
provide labor on specific real property. The results of the
labor almost always result in physical improvements to property
which can be seen and verified." In contrast, CELC contends,
"AB 1164 appears to apply to all real property owned by the
employer, plus all personal property subject to security
interests under the Commercial Code." According to CELC, this
measure will allow employees to "impair title to real and
personal property for at least 18 months after the employee
ceases employment . . . over unproven allegations of unpaid
wages."
A broad coalition of business, financial, and employer groups,
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apparently headed by the California Chamber of Commerce, claim
that this "job killer" bill would "cripple California businesses
by allowing any employee, employee representative, or Labor
Commissioner to file super priority liens on an employer's real
property or any property where an employee 'bestowed labor' for
an alleged, yet unproven, wage claim." The Chamber coalition
claims that this "bill would essentially destroy commercial and
personal real estate [by allowing] a wage lien to take
precedence over almost all other liens or judgments." The
opponents contend that California wage and hour laws are
complex, and that the wages and benefits owed can depend upon a
number of factors (e.g. the classification of the employee).
Thus these disputes often go beyond the simple question of
whether the promised wage rate was paid, according to the
opposition. Yet despite this complexity, opponents claim, an
employee can file a lien against an employer's property - or
even on property owned by someone other than the employer if
labor were bestowed upon the property - on the basis of a mere
allegation without providing any evidence that employer violated
wage or hour laws. (However, it should be noted that the bill
requires somewhat more than a mere allegation; the notice of
lien must be executed under penalty of perjury.) Opponents
contend that because these liens take priority over most other
liens - except tax liens, purchase money mortgages, and other
wage or mechanic's liens - they will wreak havoc with the real
estate industry. Finally, opponents contend that because this
bill permits an employee to record a lien against any property
upon which labor was bestowed, it will affect the property of
persons other than the employer.
PRIOR RELATED LEGISLATION :
This bill is similar, but not identical, to the introduced
version of AB 2517 (Eng) from 2012. AB 2517 was subsequently
amended to provide for wage liens only in the car wash and
polishing industry. AB 2517 failed passage on the Assembly
floor.
REGISTERED SUPPORT / OPPOSITION :
Support
CA Conference Board of the Amalgamated Transit Union
CA Conference of Machinists
California Employment Lawyers Association
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California Federation of Labor
California Immigrant Policy Center
California Labor Federation, AFL-CIO
California Rural Legal Assistance Foundation
California State Association of Electrical Workers
California State Pipe Trades Council
California Teamsters Public Affairs Council
Center on Policy Initiatives
Central American Resource Center
Centro Laboral de Graton (Graton Day Labor Center)
Chinese Progressive Association
Engineers & Scientists of CA, IFPTE Local 20, AFL-CIO
Garment Worker Center
Hayward Day Labor Center (co-sponsor)
Institute of Popular Education of Southern California
International Longshore and Warehouse Union
Koreatown Immigrant Workers Alliance (co-sponsor)
La Raza Centro Legal
Legal Aid Society - Employment Law Center
Maintenance Cooperative Trust Fund
National Day Laborer Organizing Network
National Employment Law Project
One Individual
Professional & Technical Engineers, IFPTE Local 21, AFL-CIO
San Diego Day Laborer Association (co-sponsor)
San Diego Day Laborers and Household Workers Association
SEIU - United Service Workers West (co-sponsor)
Service Employees International Union (co-sponsor)
Teamster's Local 396 (co-sponsor)
UCLA Labor Center
United Food & Commercial Workers Western States Council
UNITE-HERE, AFL-CIO
Utility Workers Union of America
Wage Justice Center (co-sponsor)
Western States Council of Sheet Metal Workers
Worksafe
Opposition
Air Conditioning Trade Association
American Council of Engineering Companies California
Associated General Contractors
Building Owners and Managers Association of California
California Association of Health Services at Home
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California Association of Realtors
California Bankers Association
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Chapter of American Fence Association
California Farm Bureau Federation
California Fence Contractors' Association
California Framing Contractors Association
California Grocers Association
California Independent Grocers Association
California Land Title Association
California Landscape Contractors Association
California League of Food Processors
California Lodging Industry Association
California Manufacturing and Technology Association
California Mortgage Bankers Association
California Retailers Association
Camarillo Chamber of Commerce
Chambers of Commerce Alliance of Ventura & Santa Barbara
Counties
East Bay Rental Housing Association
El Centro Chamber of Commerce
Engineering Contractors Association
Flasher Barricade Association
Fullerton Chamber of Commerce
Garden Grove Chamber of Commerce
Greater Conejo Valley Chamber of Commerce
Greater Fresno Area Chamber of Commerce
Greater Riverside Chambers of Commerce
International Council of Shopping Centers
Irwindale Chamber of Commerce
Long Beach Area Chamber of Commerce
Marin Builders Association
NAIOP of California, the Commercial Real Estate Development
Association
National Federation of Independent Business
Palm Desert Area Chamber of Commerce
Plumbing-Heating-Cooling Contractors Association of California
Redondo Beach Chamber of Commerce
San Gabriel Valley Legislative Coalition of Chambers
Santa Clara Chamber of Commerce
Simi Valley Chamber of Commerce
South Bay Association of Chambers of Commerce
Southwest California Legislative Council
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Tulare Chamber of Commerce
Western Electrical Contractors Association
Western Growers Association
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091