BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
William W. Monning, Chair
Date of Hearing: June 12, 2013 2013-2014 Regular
Session
Consultant: Alma Perez Fiscal:Yes
Urgency: No
Bill No: AB 1386
Author: Committee on Labor and Employment
As Introduced/Amended: March 4, 2013
SUBJECT
Employment: employee complaints: final orders
KEY ISSUES
Should the Legislature shorten the time frame necessary to
obtain a lien on an employer's real and personal property after
the Labor Commissioner has issued an order for the employee?
Should the Legislature authorize the Labor Commissioner to
record a final order, decision or award for unpaid wage claims
directly with a local county recorder - instead of waiting for
the Superior Court to file the paperwork - in order to speed up
the collection of unpaid wages?
ANALYSIS
Existing law allows an employee to bring a claim for unpaid
wages, penalties, and damages before the Labor Commissioner.
(Labor Code §98) Existing law vests with the Labor Commissioner
the authority to hear employee complaints regarding the payment
of wages and other employment-related issues. Among other
things, existing law requires the Labor Commissioner to do the
following (Labor Code §98.2):
1) File an order, decision, or award within 15 days of
hearing an employee complaint. If no party to the action
appeals within 10 days after its service, the order,
decision, or award becomes the final order for the action.
a) An employer seeking to appeal a decision must first
post an undertaking (bond or cash deposit) with the
reviewing court in the amount of the order, decision or
award.
2) File the final order with the clerk of the superior
court of the appropriate county within 10 days of the
order, decision, or award becoming final, unless the
parties reach a settlement agreement approved by the Labor
Commissioner.
Existing law then requires the clerk of the superior court to
enter judgment in conformity with the final order, which has the
same force and effect as a judgment entered in a civil action.
This Bill would authorize the Labor Commissioner to take some
additional steps to streamline the collection procedure for
employee wage claims that are final. Specifically, the bill
would:
1)Authorize the Labor Commissioner to file, within 10 days of
the order becoming final, a certified copy of the final order
with the county recorder of any county in which the employer's
property may be located.
2)Specify that the order may be filed in any and all counties of
the state depending upon information obtained concerning the
employer's assets.
3)Specify that the amount found due under the order shall be a
lien in favor of the employee named in the order, and against
the personal and real property of the employer named, within
the county in which the order is filed.
4)Provide that the recorder shall accept and file the order and
record it as a mortgage on real estate, shall file the same as
a security interest, and shall index the same as a mortgage on
real estate and as a security interest.
5)Provide that the recorder shall include all charges for the
services to be performed by him or her in the amount due under
the lien.
Hearing Date: June 12, 2013 AB 1386
Consultant: Alma Perez Page 2
Senate Committee on Labor and Industrial Relations
COMMENTS
1. Need for this bill?
Current law allows an employee to bring a claim for unpaid
wages, penalties, and damages before the Labor Commissioner.
If the Labor Commissioner issues an order, decision or award
(ODA) in the employee's favor, and the employer fails to
appeal within 10 days, the order becomes final. The Labor
Commissioner is required to file a certified copy of that
order with the Superior Court to be entered as a judgment
against the employer in the amount of the order. A judgment
is the legal determination of rights, but a judgment, in and
of itself, does not create a legal obligation to pay the
judgment amount.
The current procedure requires the order, decision or award to
be converted into a superior court judgment before it can be
recorded as a property lien against an employer's property. If
the employer has not appealed the decision within the time
permitted, the employee must wait until the clerk of the
superior court has entered the order, decision or award into
the court's judgment book or rolls. This action by the court
clerk may take several weeks, and given the effect of budget
cuts on the courts, will most likely take longer in the
future. After the judgment has been entered, a request for an
"Abstract of Judgment" must be made of the same court in order
to obtain a document the county recorder will accept for
filing and recording of a lien. This two-step process may
result in a delay in securing the lien to the employer's
property, during which, the author agues, an employer has the
ability to divest itself of property in order to avoid paying
the employee's wages, damages, and penalties due.
This bill would streamline the collection process for final
orders of unpaid wages by authorizing the Labor Commissioner
to file a certified copy of the final order with the county
recorder of any county directly - eliminating the steps
required of the court in order to file a lien on the
Hearing Date: June 12, 2013 AB 1386
Consultant: Alma Perez Page 3
Senate Committee on Labor and Industrial Relations
employer's real and personal property.
2. Proponent Arguments :
According to the author, under the current procedure, the
Labor Commissioner files a certified copy of the order,
decision or award with the clerk of the superior court who
then enters it as a judgment on the judgment rolls of the
court. This is a ministerial act of the clerk and does not
require any action by the court itself in oversight or
approval. The author argues that in order to record the
judgment debt, the employee must first obtain an Abstract of
Judgment from the court which often takes several weeks, and
unfortunately, during that time the employer may have
liquidated its business, or otherwise divested itself of
tangible and real property, thereby denying the employee the
opportunity to collect the wages found due and owing by the
Labor Commissioner.
This bill would allow the Labor Commissioner to simply record
a final order, decision or award with the local county
recorder, eliminating the two-step process requiring action by
the Superior Court. The author argues that this will speed
collection activity and will help ensure that employees are
able to collect on their wage claims before an unscrupulous
employer is able to move or hide their assets.
3. Opponent Arguments :
The Commercial Transactions Committee of the Business Law
Section of the State Bar of California is opposed to this
measure, not because the legislation would shorten the time
necessary to obtain a lien after an order is issued, but
because the specific procedures for creating the lien, and the
interaction between this lien and other liens are likely to
create unnecessary confusion and litigation. Among other
things, the Committee cites the following arguments in
opposition:
a) The method for creating the lien in personal
property is inconsistent with the means by which other
liens are created, which is by a filing with the
Hearing Date: June 12, 2013 AB 1386
Consultant: Alma Perez Page 4
Senate Committee on Labor and Industrial Relations
California Secretary of State. The bill would provide for
the recording of the order with the county recorder to
obtain a lien on the personal property of the employer.
Additionally, they argue that this new method would make
it difficult to locate liens because a person would have
to search every county in which the employer may be
located - increasing the costs for businesses to obtain
financing.
b) The bill conflicts with other state and federal laws
that govern property rights. The bill provides for a lien
on all personal property of an employer located within a
particular geographical area. By extending the lien to
all personal property, the lien would cover personal
property in which property rights may be governed by
other state laws or even pre-empted by federal laws. For
example, liens over vehicles and certain vessels are
required to be registered with the California Department
of Motor Vehicles, or aircrafts which are registered with
the FAA, or vessels documented with the U.S. Coast Guard
which may be governed by U.S. federal law.
c) The bill provides for a lien on property in which a
judgment lien is not permitted. Under current law, a
judgment lien can only be created in property that is
subject to enforcement of money judgments; specifically
listed types of personal property (namely, and subject to
other limitations, accounts receivable, equipment, farm
products, inventory and negotiable documents of title).
By allowing the proposed lien to cover a broader range of
assets, the bill puts other judgment creditors, including
employees that have obtained judgments, at a disadvantage
to an employee that has obtained a lien by the filing of
a Labor Commissioner's order.
Additionally, opponents argue that current provisions
governing judgment liens are covered in over 40 sections of
the Code of Civil Procedure. With the brevity of the bill,
Hearing Date: June 12, 2013 AB 1386
Consultant: Alma Perez Page 5
Senate Committee on Labor and Industrial Relations
there are a number of significant procedural and protective
provisions applicable to judgment liens that are not covered
or addressed. Among the questions not addressed by the bill
are the term of a lien, the timing of creation of a lien,
issues with property acquired after the creation of a lien,
removal of property from applicable county, lien priorities,
and termination of a lien upon satisfaction, among others.
Lastly, opponents state that they would be happy to work with
the author and other interested parties to try to achieve the
underlying goals of the bill in a manner that addresses the
concerns identified and is therefore less disruptive to
current commercial practices and expectations.
SUPPORT
California Rural Legal Assistance Foundation
OPPOSITION
Commercial Transactions Committee, State Bar of CA Business Law
Section - Unless Amended
Hearing Date: June 12, 2013 AB 1386
Consultant: Alma Perez Page 6
Senate Committee on Labor and Industrial Relations