BILL ANALYSIS Ó AB 2074 Page 1 Date of Hearing: May 7, 2014 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 2074 (Roger Hernández) - As Introduced: February 20, 2014 SUBJECT : Recovery of wages: liquidated damages. SUMMARY : Provides that the statute of limitations for liquidated damages for failure to pay the minimum wage is the same period as the statute of limitations for actions to recover the unpaid wages. EXISTING LAW : 1)Requires all employers to pay employees not less than the state minimum wage. 2)Authorizes an employee to bring an administrative or civil claim for the unpaid balance of minimum wages owed to that employee. 3)Provides that in any action to recover unpaid minimum wages, an employee shall be entitled to recover liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon. 4)Provides that if the employer demonstrates to the satisfaction of the court or the Labor Commissioner that the act or omission giving rise to the action was in good faith and that the employer had reasonable grounds for believing that the act or omission was not a violation of any provision of the Labor Code relating to minimum wage, or an order of the commission, the court or the Labor Commissioner may, as a matter of discretion, refuse to award liquidated damages or award any amount of liquidated damages not exceeding the amount specified above. FISCAL EFFECT : None COMMENTS : Current law requires all employers to pay workers not less than the state minimum wage. In addition, existing law provides that if an employer fails to pay the minimum wage, the worker is entitled to liquidated damages in an amount equal to the unpaid wages owed. This provision of liquidated damages is AB 2074 Page 2 an acknowledgement of the seriousness of minimum wage violations and is intended to act at a deterrent for an employer to violate the law. The statute of limitations for failure to pay the minimum wage is generally three years. However, in a recent California Court of Appeal decision, the court held that the statute of limitations for the liquidated damages is only one year. Bain v. Tax Reducers, 219 Cal. App. 4th 110 (2013). According to the author, this disparity in the statute of limitations dilutes the deterrent effect of liquidated damages for minimum wage violations. In short, the result of the court's decision is that an employee can recover for three years of minimum wage violations. However, the worker can only recover liquidated damages for a one year period of time. Although existing law contains other civil penalties for failure to pay minimum wage, liquidated damages are payable to the worker. Therefore, the author contends that as a result of the court's decision, there is no effective penalty for the employer for years two and three. If they are found to have violated the law, the only remedy is to make them pay the minimum wages they should have paid if they were following the law. The author states that the deterrent effect of the liquidated damages can only be fulfilled if the worker is able to recover them for the entire statutory period. Therefore, this bill provides that the statute of limitation for liquidated damages for failure to pay minimum wage is the same as the statute of limitations for the wage claims themselves. ARGUMENTS IN SUPPORT : Supporters argue that this bill will bring consistency between the statute of limitations for claims of liquidated damages for minimum wage violations and claims for unpaid minimum wages. Supporters state that allowing for the claim of unpaid wages, yet only allowing for the liquidated damages for one year, is a misstep in justice. Restricting the ability to obtain liquidated damages dilutes the deterrent effect on employers who fail to pay the minimum wage. A damages scheme that only adds AB 2074 Page 3 an additional liquidated damages award for one year of an unpaid minimum wage claim sends a statement that there is no real penalty for such worker exploitation beyond one year. They conclude that workers should be able to recover liquidated damages for the entire statutory period. REGISTERED SUPPORT / OPPOSITION : Support California Conference of Machinists California Conference of the Amalgamated Transit Union California Federation of Teachers California Labor Federation, AFL-CIO California Rural Legal Assistance Foundation California School Employees Association California State Association of Electrical Workers California State Pipe Trades Council California Teamsters Public Affairs Council Communications Workers of America, District 9 Engineers & Scientists, IFTPE Local 20 International Longshore and Warehouse Union, Coast Division Professional & Technical Engineers, IFPTE Local 21 UNITE HERE Utility Workers Union of America, Local 132 Western States Council of Sheet Metal Workers Opposition None on file. Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091