BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
AB 2074 (Hernández)
As Introduced
Hearing Date: June 24, 2014
Fiscal: No
Urgency: No
TMW
SUBJECT
Recovery of Wages: Liquidated Damages
DESCRIPTION
This bill would provide that a suit for liquidated damages may
be filed at any time before the expiration of the statute of
limitations for bringing the underlying action alleging payment
of less than the state minimum wage.
BACKGROUND
Existing law authorizes an employee, who is paid less than the
minimum wage, to recover liquidated damages in an amount equal
to the wages unlawfully withheld by an employer. Liquidated
damages are monetary compensation awarded for a loss, detriment,
or injury to the employee resulting from the employer's failure
to pay the minimum wage. The employee may recover liquidated
damages in an administrative action before the Labor
Commissioner or in a civil action.
Existing law authorizes the Labor Commissioner to collect from
an employer, who pays an employee less than minimum wage, a
civil penalty, restitution of wages, and liquidated damages to
the employee. The statute of limitations for an action for
unpaid wages is three years for statutorily created actions
(i.e., wage claims) and one year for an action for penalties,
unless the statute imposing it prescribes a different
limitation.
A recent Court of Appeal decision has raised the question as to
whether a claim for liquidated damages, considered as penalties
(more)
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against a violating employer, must be filed by the employee
within the three-year statute of limitations provided for the
underlying wage claim or whether liquidated damages are subject
to the one-year statute of limitations provided for penalty
claims. Although this issue was previously resolved to
authorize the three-year statute of limitations for penalties
based on the statute of limitations for the underlying claim
(see Pineda v. Bank of America (2010) 50 Cal.4th 1389), a recent
case decided that liquidated damages are, instead, subject to
the one-year statute of limitations for penalty claims. (See
Bain v. Tax Reducers, Inc. (2013) 219 Cal.App.4th 110.)
This bill would resolve that conflict by providing that a suit
for liquidated damages may be filed at any time before the
expiration of the statute of limitations for bringing the
underlying action alleging payment of less than the state
minimum wage.
This bill was heard by the Senate Labor and Industrial Relations
Committee on June 11, 2014, and passed out on a vote of 4-1.
CHANGES TO EXISTING LAW
Existing law provides for a three-year statute of limitations to
file an action upon a liability created by statute, other than a
penalty or forfeiture. (Code Civ. Proc. Sec. 338.)
Existing law provides for a one-year statute of limitations to
file an action upon a statute for a penalty or forfeiture, if
the action is given to an individual, or to an individual and
the state, except if the statute imposing it prescribes a
different limitation. (Code Civ. Proc. Sec. 340.)
Existing law prescribes specified timelines for final payment by
an employer to an employee due to discharge, quitting
employment, end of temporary employment assignment, or other
industry-specific pay timelines. (Lab. Code Secs. 201, 201.3,
201.5, 202, 205.5.)
Existing law authorizes the Labor Commissioner to investigate
employee complaints and allows the Labor Commissioner to hold a
hearing in any action to recover wages, penalties, and other
demands for compensation, including liquidated damages if the
complaint alleges payment of a wage less than the minimum wage.
(Lab. Code Sec. 98.)
AB 2074 (Hernández)
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Existing law requires that, if an employer willfully fails to
pay wages due to an employee who is discharged or who quits, the
wages of the employee shall continue as a penalty from the due
date thereof at the same rate until paid or until an action
therefor is commenced for up to 30 days, and penalties for
failure to timely pay wages can be sought until the expiration
of the statute of limitations for the wages in which the
penalties are being sought. (Lab. Code Sec. 203.)
Existing law authorizes the Department of Industrial Relations
or the Division of Labor Standards Enforcement, with or without
the consent of the employee or employees affected, to commence
and prosecute a civil action to recover unpaid minimum wages or
unpaid overtime compensation, including interest, owing to any
employee, as specified, and in addition to wages, compensation,
and interest, the court shall award reasonable attorney's fees
and costs of suit. (Lab. Code Sec. 1193.6(a).)
Existing law authorizes an employee receiving less than the
legal minimum wage or legal overtime compensation to recover in
a civil action the unpaid balance of the full amount of the
minimum wage or overtime compensation, including interest,
reasonable attorney's fees and costs, and liquidated damages.
(Lab. Code Sec. 1194, 1194.2.)
Existing law authorizes the Labor Commissioner to issue a
citation, as specified, to the employer and provides the
following civil penalties against an employer who pays or causes
to be paid to any employee wages less than the legal minimum
wage:
for any initial violation that is intentionally committed,
$100 for each underpaid employee for each pay period for which
the employee is underpaid; and
for each subsequent violation for the same specific offense,
$250 for each underpaid employee for each pay period for which
the employee is underpaid regardless of whether the initial
violation is intentionally committed. (Lab. Code Sec.
1197.1.)
Existing law authorizes the Labor Commissioner to adopt
regulations setting a minimum wage for all employees in
California. (Lab. Code Sec. 1182.)
Existing law sets a minimum wage for all employees in
California, with limited exceptions, and prohibits employers,
unless specified, from paying less than the state minimum wage.
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The current minimum wage is $9.00 per hour and will rise to
$10.00 per hour on January 1, 2016. (Lab. Code Sec. 1182.12.)
Existing law authorizes an employee receiving less than the
legal minimum wage or legal overtime compensation to recover in
a civil action the unpaid balance of the full amount of the
minimum wage or overtime compensation, including interest and
reasonable attorney's fees and costs. (Lab. Code Secs. 1194.)
Existing law sets the interest rate at 10 percent. (Civ. Code
Sec. 3289.)
Existing law also requires that if an employee is found to have
been paid less than the minimum wage, that employee must be paid
liquidated damages in an amount that is equal to the wages
unlawfully unpaid, plus interest. (Lab. Code Sec. 1194.2(a).)
Existing law provides that if an employer demonstrates to the
satisfaction of the court that the failure to pay the minimum
wage was in good faith and that the employer had reasonable
grounds for believing that the act or omission was not a
violation of minimum wage law or regulations, the court may, in
its discretion, refuse to award liquidated damages or award a
lesser amount of liquidated damages to the employee. (Lab. Code
Sec. 1194.2(b).)
This bill would clarify that an individual may file a suit for
liquidated damages at any time before the expiration of the
statute of limitations on the original action for unpaid minimum
wages from which the liquidated damages arise.
COMMENT
1. Stated need for the bill
The author writes:
The statute of limitations for failure to pay minimum wage is
generally three years. However, in a recent California Court
of Appeals 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).
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
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violations. However, the worker can only recover liquidated
damages for a one year period of time. In essence, this means
that there is no real penalty for the employer for years two
and three. . . .
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.
2. Resolving confusion over statute of limitations for liquidated
damages
Existing law provides a three-year statute of limitations for
actions created by statute must be filed within three years,
which includes wage claims. However, existing law separately
provides a one-year statute of limitations for actions on
penalties or forfeitures, unless otherwise provided by statute.
Liquidated damages are considered penalties.
A recent Court of Appeals decision highlighted a problem with
existing law in that it does not clearly define the statute of
limitations for liquidated damages for wage claims. In Bain v.
Tax Reducers, Inc. (2013) 219 Cal.App.4th 110, the court held
that, because there is no statute that provides otherwise, the
statute of limitations on the employee's liquidated damages
claim was only one year. This ruling reversed a prior decision
in Pineda v. Bank of America (2010) 50 Cal.4th 1389, which held
that the statute of limitations for penalty claims was the same
as the statute of limitations on the underlying wage claim. It
is important to note that the Pineda court discussed the
statutory limitations issue in great detail because neither the
wage claim statutes, nor the liquidated damages provision are
explicit. The Pineda court held that the statute of limitations
for wage claims govern all actions seeking penalties on those
wage violations because "[a]bsent explicit statutory language to
the contrary, common sense would suggest that, where the
Legislature has set forth a statute of limitations in one part
of a statute, the prescribed limitations period governs the
filing of actions provided for in another part of the same
statute." (Id. at pp. 1395-1396, 1401.)
Notably, the Pineda court concluded that "the Legislature
adopted the penalty provision as a disincentive for employers to
pay final wages late. [Citation omitted.] It goes without
saying that a longer statute of limitations for [wage claim
penalties] provides additional incentive to encourage employers
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to pay final wages in a prompt manner, thus furthering the
public policy." (Id. at p. 1400.) Proponents assert that
restricting the ability to obtain liquidated damages dilutes the
deterrent effect on employers who fail to pay the minimum wage,
and a damages scheme that only adds an additional liquidated
penalty for the first year of an unpaid minimum wage claim sends
a statement that there is no real penalty for such worker
exploitation after the first year. In order to clarify the
ability of an employee to file an action for liquidated damages
within the same amount of time as the statute of limitations on
the underlying wage claim, this bill would specify that an
individual may file a suit for liquidated damages at any time
before the expiration of the statute of limitations on the
original action for unpaid minimum wages from which the
liquidated damages arise.
Support : California Conference of Machinists; California
Conference of the Amalgamated Transit Union; California
Federation of Teachers, AFL-CIO; California Labor Federation,
AFL-CIO; California Rural Legal Assistance Foundation;
California School Employees Association, AFL-CIO; California
State Association of Electrical Workers; California State Pipe
Trades Council; California Teamsters Public Affairs Council;
Communications Workers of America, AFL-CIO, District 9;
Engineers & Scientists, IFPTE 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 Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
AB 442 (Nazarian, Ch. 735, Stats 2013) authorized the Labor
Commissioner to recover liquidated damages for an employee who
brings a complaint alleging payment of less than the minimum
wage.
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AB 240 (Bonilla, Ch. 272, Stats. 2011) authorized an employee
who is paid less than the minimum wage to recover liquidated
damages from the employer.
Prior Vote :
Senate Committee on Labor and Industrial Relations (Ayes 4, Noes
1)
Assembly Floor (Ayes 56, Noes 21)
Assembly Committee on Labor and Employment (Ayes 5, Noes 1)
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