BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2416|
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THIRD READING
Bill No: AB 2416
Author: Stone (D), et al.
Amended: 8/18/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-2, 6/24/14
AYES: Jackson, Corbett, Lara, Leno, Monning
NOES: Anderson, Vidak
SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 4-1, 6/25/14
AYES: Hueso, Leno, Padilla, Mitchell
NOES: Wyland
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 43-27, 5/28/14 - See last page for vote
SUBJECT : Liens: laborers and employees
SOURCE : SEIU California
DIGEST : This bill enacts the California Wage Theft Recovery
Act and authorizes an employee to have a lien on all property of
the employer in California for the full amount of any wages and
other compensation, penalties, and interest owed to the
employee; and also authorizes the court to award to the
prevailing plaintiff court costs and reasonable attorney's fees
in a civil action.
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ANALYSIS :
Existing law:
1. Provides 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. Existing
law also requires the Legislature to provide, by law, for the
speedy and efficient enforcement of such liens.
2. Provides for mechanics liens relating to services and
supplies provided on a work of improvement, and generally
regulates the conditions under which a mechanics lien may be
enforced.
3. Recognizes prejudgment wage liens against property as a
remedy in certain industries, including mining, agriculture,
and logging.
4. Requires the Labor Commissioner and his/her deputies and
representatives authorized by him/her in writing, upon the
filing of a claim therefor by an employee, or an employee
representative authorized in writing by an employee, with the
Labor Commissioner, to take assignments of, among other
things, wage claims and incidental expense accounts and
advances and mechanics and other liens of employees.
5. Authorizes the Labor Commissioner, after investigation and
upon determination that wages or monetary benefits are due
and unpaid to any worker in the State of California, to
collect such wages or benefits on behalf of the worker
without assignment of such wages or benefits to the Labor
Commissioner.
6. Authorizes the Labor Commissioner to investigate employee
complaints and provide for 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 fixed by an order of the
Industrial Welfare Commission or by statute, properly before
the division or the Labor Commissioner, including orders of
the Industrial Welfare Commission, and is required to
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determine all matters arising under his/her jurisdiction.
7. Authorizes the Division of Labor Standards Enforcement to
file preferred claims, mechanics' liens, and other liens of
employees in the name of the Labor Commissioner, his/her
deputy or representative or in the names of the employees,
whenever the facts have been investigated and found to
support the claims; and requires a statement that such facts
have been found shall be alleged in the preferred claim or
lien if it is filed in the name of the Labor Commissioner,
his/her deputy or representative.
This bill:
1.Provides that the amount of the lien includes unpaid wages and
other compensation required by existing California law,
penalties available under the Labor Code, interest at the same
rate as for prejudgment interest in this state, and the costs
of filing and service of the lien, but not less than the
amount required by law, including direct wages and
compensation required to be paid to other persons or entities
that would qualify as "employer payments," as defined.
2.Provides that a lien may be filed by any person or entity,
including any governmental agency, to which a portion of an
employer's compensation is payable or has standing under
applicable law to maintain a direct legal action on behalf of
the employee.
3.Provides that a lien on all property of the employer, and the
real property at which the employee performed work, shall be
subject to the following:
A. If the property owner is a natural person, the lien
shall not apply to the property owner's principal
residence.
B. A lien shall not be claimed by an employee who is exempt
from specified administrative, executive, or professional
exemptions under existing law.
C. The lien shall not attach if the employer or property
owner has obtained a surety bond or insurance in an amount
adequate to fully satisfy the employee's claim, as
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specified.
D. The lien shall not apply to work performed under a valid
collective bargaining agreement, as specified.
E. The lien action may be also be undertaken by any person
or entity to which a portion of an employee's compensation
is payable or that has standing under applicable law, or
that is authorized by the employee to act on the employee's
behalf.
1.Requires the employee, as specified, to provide the owner of
the property with a preliminary written notice of the intent
to record a lien, as specified.
2.Specifies that the lien shall not attach if the employer
receives either a court order or an order from the Labor
Commissioner finding that the employee does not have a
reasonable likelihood of success on the claim. The employee
shall release the lien within 30 days of being provided with
proof of the order.
3.Provides that the notice of lien shall be executed under
penalty of perjury; shall be permanently extinguished unless
the notice of lien is served on the employer or property owner
within 180 days of the date the employee ceased working for
the employer and shall include specified information.
4.Establishes timelines and procedures for the commencement of
civil actions to enforce the lien, as specified.
5.Sets forth conditions under which an employer may release the
notice of lien. Requires the employer provide notice to the
employee that the lien should be released and the basis for
that belief, and request that the employee record or file a
release of the notice of lien. If the employee fails to
respond within 30 days of the date of mailing of the notice,
the employer may give notice to the Labor Commissioner that
the employee did not respond, and request that the Labor
Commissioner file or record a release of the notice of lien,
including a copy of the notice of lien and a certification,
made under penalty that the employer followed required
procedures and that the employee did not respond.
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6.Provides that if an employee acted unreasonably or in bad
faith is refusing to file a release of lien, the employer or
property owner is entitled to recover attorney's fees and
costs, and authorizes the court to issue a fine against the
employee not to exceed $1,000.
7.Requires the Department of Industrial Relations to report
specified information to the Legislature by January 1, 2019.
Background
Wage theft is a term used to describe labor law violations such
as not paying an employee minimum wages or overtime, not paying
for off-the-clock work, tip stealing, and not paying final
wages.
Several high profile wage theft cases have been reported in
recent years. In February 2009, the Los Angeles City Attorney
filed criminal charges against two car wash owners for failing
to pay 250 workers the minimum wage and for denying them legally
required meal and rest breaks. The filing alleged that, in
violation of minimum wage laws, workers were paid a flat rate of
$35.00 to $40.00 a day for shifts of more than eight hours, that
their lunch breaks were as little as fifteen minutes a day, they
received no pay for overtime work, and no medical care was
provided for lacerations and acid burns caused by the machinery
and chemicals they used on the job. The owners were charged
with failing to pay a total of $450,000 in back wages over five
years. (Cathcart, Carwashes Accused of Labor Violations (Feb.
11, 2009) New York Times
[as of
June 11, 2014].)
A similar lawsuit against a builder employing residential
construction workers in California, Nevada, and Arizona alleged
that the company failed to pay employees for hours they worked,
did not pay legally required overtime or provide breaks, and
kept workers off the clock while they traveled between job sites
and awaited materials. The suit was settled in October 2009,
providing over $242,000 in unpaid wages to 85 workers.
(McDonnell, Builder to Settle with 85 Workers in Overtime Case
(Oct. 13, 2009) Los Angeles Times
[as of June 11, 2014].)
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The problem is not limited to small businesses like car washes
or garment subcontractors. In 2008, Wal-Mart announced a
settlement of 63 cases in 42 states, which involved charges that
the company had forced employees to work off the clock without
pay after their official shifts ended. The settlement totaled
$352 million in unpaid wages and involved hundreds of thousands
of current and former Wal-Mart hourly employees across the
country. In California, a jury ordered Wal-Mart to pay $172
million for making employees miss meal breaks. (Associated
Press, Wal-Mart Settles Workers' Suit for $54.25M (Dec. 9, 2008)
CBS News [as
of June 11, 2014].)
A recent University of California Los Angeles (UCLA) study found
that an estimated 654,914 workers in L.A. County suffer at least
one pay-based violation every week. Front-line workers in
low-wage industries lose more than $26.2 million per week as a
result of employment and labor law violations. The study noted
the societal ills of wage theft in that "[w]age theft not only
depresses the already meager earnings of low-wage workers, it
also adversely impacts their communities and the local economies
of which they are a part. Low-income families spend the bulk of
their earnings on basic necessities like food, clothing, and
housing. Their expenditures circulate through local economies,
supporting businesses and jobs. Wage theft robs local
communities of this spending and ultimately limits economic
growth." (Milkman, González, Narro, Wage Theft and Workplace
Violations in Los Angeles, The Failure of Employment and Labor
Law for Low-Wage Workers (2010) Institute for Research on Labor
and Employment, University of California, Los Angeles, p. 58.)
Further, only 17% of California workers who succeed in a wage
claim filed with the California Division of Labor Standards
Enforcement were able to recover any payment, leaving 83% of
wage claimants unpaid. (National Employment Law Project and
UCLA Labor Center, Hollow Victories, the Crisis in Collecting
Unpaid Wages for California's Workers (June 27, 2013)
[as of
June 11, 2014] p. 2.)
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
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According to the Senate Appropriations Committee:
The Department of Industrial Relations indicates that it would
incur first-year costs of $8.3 million to $8.7 million
(special fund) to implement the provisions of this bill.
Ongoing costs will range from $7.5 million to $8 million.
Potential increased costs to the Secretary of State of up to
$100,000 annually (General Fund).
Unknown, potentially significant court costs associated with
additional proceedings regarding wage claims.
SUPPORT : (Verified 8/15/14)
SEIU California (source)
Asian Americans Advancing Justice - Asian Law Caucus
Asian Americans Advancing Justice - Los Angeles
California Employment Lawyers Association
California Labor Federation, AFL-CIO
California Professional Firefighters
California School Employees Association, AFL-CIO
Centro Legal de la Raza
Chinese Progressive Association
CLEAN Carwash Campaign
Coalition for Humane Immigrant Rights of Los Angeles
Community Action Board of Santa Cruz County
Consumer Attorneys of California
Employee Rights Center
Equal Rights Advocates
Filipino Advocates for Justice
Garment Workers Center
Golden Gate University School of Law
Koreatown Immigrant Workers Alliance
Labor & Employment Committee
Los Angeles Alliance for a New Economy
Maintenance Cooperation Trust Fund
National Day Laborer Organizing Network
National Employment Law Project
National Immigration Law Center
National Lawyers Guild
Sunrise Floor Systems LLC
Wage Justice Center
Women's Employment Rights Clinic
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Workplace Justice Initiative
OPPOSITION : (Verified 8/15/14)
Acclamation Insurance Management Services
Agricultural Council of California
Air Conditioning Trade Association
Allied Managed Care
Apartment Association of Orange County
Apartment Association, California Southern Cities
Associated Builders and Contractors - San Diego Chapter
Associated Builders and Contractors of California
Associated General Contractors
Brawley Chamber of Commerce
Building Owners and Managers Association of California
California Apartment Association
California Asian Pacific Chamber of Commerce
California Association for Health Services at Home
California Association of Realtors
California Association of Winegrape Growers
California Bankers Association
California Building Industry Association
California Business Properties Association
California Business Roundtable
California Chamber of Commerce
California Chapter of American Fence Association
California Escrow Association
California Farm Bureau Federation
California Fence Contractors' Association
California Grocers Association
California Hospital Association
California Hotel and Lodging Association
California Land Title Association
California Landscape Contractors Association
California League of Food Processors
California Manufacturers and Technology Association
California Mortgage Association
California Mortgage Bankers Association
California New Car Dealers Association
California Newspaper Publishers Association
California Pool and Spa Association
California Professional Association of Specialty Contractors
California Restaurant Association
California Retailers Association
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Civil Justice Association of California
Coalition of Small and Disabled Veterans Businesses
Construction Employers' Association
East Bay Rental Housing Association
El Centro Chamber of Commerce
Family Winemakers of California
Flasher Barricade Association
Fullerton Chamber of Commerce
Greater Bakersfield Chamber of Commerce
Greater Riverside Chambers of Commerce
Independent Insurance Agents & Brokers of California
International Council of Shopping Centers
Marin Builders Association
NAIOP of California - Commercial Real Estate Development
Association
National Federation of Independent Business
NorCal Rental Property Association
Orange County Business Council
Oxnard Chamber of Commerce
Palm Desert Area Chamber of Commerce
Personal Insurance Federation of California
Plumbing-Heating-Cooling Contractors Association of California
Porterville Chamber of Commerce
San Jose Silicon Valley Chamber of Commerce
Santa Clara Chamber of Commerce and Convention-Visitors Bureau
Simi Valley Chamber of Commerce
Southwest California Legislative Council
Tahoe Chamber of Commerce
TechNet
The Chamber of the Santa Barbara Region
Torrance Area Chamber of Commerce
Visalia Chamber of Commerce
Western Carwash Association
Western Electrical Contractors Association
Western Growers Association
ARGUMENTS IN SUPPORT : The author writes:
According to a UCLA Labor Center report from 2013, only
17% of California workers who succeed in a wage claim with
the California Division of Labor Standards Enforcement
(DLSE) were able to successfully collect those wages. It
is unacceptable that 83% of individuals who have won
decisions with the DLSE do not receive their wages.
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The collection rate is so low because Labor Commissioner
or Civil Court decisions on wage claims can sometimes take
from a year to a year and a half to conclude. This long
time period at times results in businesses closing or
filing for bankruptcy. In fact, 60% of DLSE judgment's
against employers are issued at a time when the business
entity is found to be "non-active." This is a major
contributing factor to the 17% collection rate.
This bill would allow an employee to place a lien on the
property of their employer, with proper notification, in
cases where the employee has determined there has been
wage theft. The ability to record this lien offers the
employee a tool for recovering lost wages. Liens have
been successful in providing mechanics and contractors
with a tool to protect themselves from wage theft, and
this bill would provide that same tool.
ARGUMENTS IN OPPOSITION : A coalition of business and
employers groups, in opposition, assert that this bill would
"cripple California businesses by allowing any employee,
governmental agency, or anyone 'authorized by the employee to
act on the employee's behalf' to record liens on an employer's
real property or any property where an employee 'performed work'
for an alleged, yet unproven, wage claim. This bill would also
severely disrupt commercial and personal real estate markets in
this state." Additionally, the coalition argues that this bill
is not just limited to minimum wage claims, but could include a
broad spectrum of labor claims, including claims for meal and
rest periods, vacation pay, expense reimbursements, compensation
for tools, uniforms, and equipment, all of which could include
an assortment of potential penalties that could be included in
the wage lien. Further, the coalition asserts that "the type
and number of different liens that may be filed and recorded
under AB 2416 are overwhelming, not just to businesses, but also
to homeowners, the Secretary of State, and county recorder's
offices." The coalition takes issue with the ability of an
employee to file a wage lien against a third-party homeowner or
commercial property owner who had no actual control over the
payment of wages for work performed at the owner's property.
The coalition argues that this bill will interfere with
commercial investments or lending in California because lenders
will be reluctant or unable to provide loans to borrowers if
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there are unproven wage liens attached to the property. The
coalition believes that the 180-day lien recordation requirement
in this bill is meaningless and is based upon the employee's
last day of work, which a third-party property would not know.
Further, the coalition notes that there is no limit on the
number of liens an employee could record against the property
owner, the bill forces property owners into courts that are
already severely underfunded, and the Labor Commissioner removal
process in this bill is ineffective. The coalition believes
there are already sufficient protections in place for the
failure to pay wages.
ASSEMBLY FLOOR : 43-27, 5/28/14
AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Ian Calderon, Campos, Chau, Chesbro, Dababneh,
Dickinson, Eggman, Fong, Garcia, Gatto, Gomez, Gonzalez,
Gordon, Hall, Roger Hernández, Holden, Jones-Sawyer, Levine,
Lowenthal, Mullin, Nazarian, Pan, John A. Pérez, V. Manuel
Pérez, Quirk, Rendon, Ridley-Thomas, Rodriguez, Skinner,
Stone, Ting, Weber, Wieckowski, Williams, Yamada, Atkins
NOES: Achadjian, Allen, Bigelow, Chávez, Conway, Cooley, Dahle,
Donnelly, Fox, Beth Gaines, Gorell, Grove, Hagman, Harkey,
Jones, Linder, Logue, Maienschein, Mansoor, Melendez,
Nestande, Olsen, Patterson, Salas, Wagner,
Waldron, Wilk
NO VOTE RECORDED: Brown, Buchanan, Daly, Frazier, Gray, Medina,
Muratsuchi, Perea, Quirk-Silva, Vacancy
AL:de 8/16/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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