BILL ANALYSIS Ó AB 2448 Page A Date of Hearing: April 23, 2014 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 2448 (Jones) - As Amended: March 20, 2014 SUMMARY : Authorizes individual employees to request flexible work schedules, as specified. Specifically, this bill : 1)Permits an employee to work up to ten hours per workday without overtime if the employee requests such a schedule in writing and the employer approves the request. 2)Requires the employer, where such a schedule is adopted, to pay overtime for all hours worked over 40 in a workweek or over ten in a workday. 3)Authorizes an employer to inform its employees that it is willing to consider employee requests to work flexible work schedules, but prohibits an employer from inducing a request by promising an employment benefit or "threatening an employment detriment." 4)Authorizes an employee or employer to discontinue a flexible work schedule at any time by giving written notice to the other party. 5)Specifies that these provisions do not apply to any employee covered by a valid collective bargaining agreement or specified public employees. 6)Makes related conforming changes. 7)Makes related legislative findings and declarations. EXISTING LAW : 1)Defines a day's work as eight hours of labor. 2)Requires that any work in excess of eight hours day, in excess of 40 hours a week, and the first eight hours on the seventh day of work are to be compensated at no less than one and one-half times the regular rate of pay, and provides corresponding exemptions for certain classifications of employees. AB 2448 Page B 3)Requires that any work in excess of 12 hours a day and in excess of eight hours on the seventh day of work are to be compensated at no less than twice the regular rate of pay, and provides corresponding exemptions for certain classifications of employees. 4)Allows employees of an employer to adopt a regularly scheduled alternative workweek that authorizes work by the affected employees for no longer than ten hours per day within a 40- hour workweek without the payment of overtime. Such alternative workweek schedules are permissible only if they receive approval in a secret ballot election by two-thirds of the affected employees. 5)Permits an employee, upon written request, to make up lost work time during the same workweek without incurring daily overtime. 6)Provides an exemption to the overtime and alternative workweek provisions of the law to an employee covered by a valid collective bargaining agreement if the agreement expressly provides for wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regularly hourly rate of pay at least 30% above the state minimum wage. FISCAL EFFECT : Unknown COMMENTS : This bill is the latest in a long series of attempts to revise various provisions of California law related to overtime and alternative workweek schedules. Those provisions of law were codified by AB 60 (Knox), the "Eight-Hour-Day Restoration and Workplace Flexibility Act of 1999." Debate in recent years has centered around questions of whether the secret ballot election process should be maintained, or whether individual employees should be authorized to establish their own individualized alternative workweek schedules. The author has titled this bill the "Workplace Flexibility Act of 2014." Brief Background on AB 60 Beginning in 1913, the Industrial Welfare Commission (IWC) had jurisdiction over working hours only of women and minors. Exercising its authority, the IWC established daily overtime AB 2448 Page C after eight hours for those groups. In 1974, the discriminatory impact of this approach was struck down in federal court. The IWC's efforts to adopt new wage orders led to a protracted legal battle. In 1980, the California Supreme Court upheld the adoption of final wage orders incorporating the eight-hour day for male and female employees. Those wage orders remained in effect until January 1, 1998, when the IWC amended five of them to eliminate daily overtime and provide that: "No overtime pay shall be required for hours worked in excess of any daily number" (Emphasis added). The five wage orders that were amended were Wage Order 1 (manufacturing industry), Wage Order 4 (professional, technical, clerical, and mechanical occupations), Wage Order 5 (public housekeeping industry), Wage Order 7 (mercantile industry), and Wage Order 9 (transportation industry). That action resulted in an unsuccessful legal challenge, legislation including SB 680 (1997) which was passed but vetoed by Governor Wilson, and ultimately AB 60, which was successfully passed and signed by Governor Davis effective January 1, 2000. AB 60, among other things, codified daily overtime after eight hours as the general rule in California. Scheduling Flexibility Under Current Law AB 60 contained several features related to flexibility in employee work schedules. First, it provided for the adoption of alternative workweek schedules pursuant to an employee election. The alternative workweek schedule may authorize the employees to work no more than ten hours per day within a 40-hour workweek without receiving overtime. Such an alternative schedule must be adopted in a secret ballot election by at least two-thirds of the affected employees. Labor Code Section 511(a) also provides that, "The regularly AB 2448 Page D scheduled alternative workweek proposed by an employer for adoption by employees may be a single work schedule that would become the standard schedule for workers in the work unit, or a menu of work schedule options, from which each employee in the unit would be entitled to choose." Moreover, Section 3(C)(1) of the IWC Wage Orders states: "If the employer proposes a menu of work schedule options, the employee may, with the approval of the employer, move from one menu option to another." Section 3(B)(1) of the IWC Wage Orders provides that, "Nothing in this section shall prohibit an employer, at the request of the employee, to substitute one day of work for another day of the same length in the shift provided by the alternative workweek agreement on an occasional basis to meet the personal needs of the employee without the payment of overtime." Section 3(C)(2) of the IWC Wage Order also provides that the term "affected employees in the work unit" may include all employees in a readily identifiable work unit, such as a division, a department, a job classification, a shift, a separate physical location, or a recognized subdivision of any such work unit. A work unit may consist of an individual employee as long as the criteria for an identifiable work unit are met. In addition, AB 60 allowed employees to take off time for a personal obligation and makeup that time during the same workweek without payment of daily overtime. Labor Code Section 513 provides that, if an employer approves a written request, an employee may makeup work time during the same workweek without incurring daily overtime, except for hours in excess of 11 in one workday. Finally, AB 60 contained an overtime exemption for employees covered by a valid collective bargaining agreement if the agreement expressly provides for wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regularly hourly rate of pay at least 30% above the state minimum wage. AB 2448 Page E "Workplace Flexibility" Has Its Benefits There has been significant debate and discussion in recent years (both at the state and national levels) about "workplace flexibility" and the benefits it can provide to workers and their families. For example, a report<1> by the Institute for Women's Policy Research noted the following: "The large majority of high-income countries have introduced flexible working statutes aimed at making it easier for employees to change how many hours, and when and where they work within their current job. Patchy progress towards more diversified work arrangements is pushing workers out of the labor market altogether, or into jobs that are below their skill levels and potential. Few economies can afford such a waste of human resources in view of changing demographics, reduced labor force growth, and global competition for knowledge. U.S. employers are faced with a dramatic increase in the share of older workers and a significant slowdown in labor force growth, even if demographic trends in the United States are less dramatic than in most other high-income countries. The growth in mothers' labor force participation, a major source of additional labor in recent decades, has stalled and U.S. labor force participation for women has fallen behind in cross-national comparison. Demand for more diverse work arrangements is high, yet workplace change is lagging behind changing workforce demographics. Flexible working statutes strengthen the ability of individual employees to find solutions that allow work-life ------------------------- <1> Hegewisch, Ariane and Janet C. Gornick. "Statutory Routes to Workplace Flexibility in Cross-National Perspective." Institute for Women's Policy Resrach, Center for WorkLife Law, University of California, Hastings College of the Law (2008). AB 2448 Page F reconciliation, but in a manner that takes account of employers' business and operational requirements. Of 20 high-income countries examined in comparison with the United States, 17 have statutes to help parents adjust working hours, six help with family care giving responsibilities for adults; 12 allow change in hours to facilitate lifelong learning; 11 support gradual retirement; and five countries have statutory arrangements open to all employees, irrespective of the reason for seeking different work arrangements. Evaluation of statutes supporting flexible working hours shows that the laws have caused few problems for employers, and that gender equality improves most where laws are interpreted broadly, not narrowly focused on part-time work." But Does "Workplace Flexibility" Benefit All Workers Equally? As stated above, there has been much discussion in recent years about the benefits to employers and employees of "workplace flexibility" and "flexible work schedules." However, a recent report<2> raised some interesting points for consideration regarding whether "workplace flexibility" in fact benefits all workers equally. For example, the report stated the following: "'Workplace flexibility' is the buzz phrase in debates about how to help busy parents better juggle the competing demands of work and family. But the public conversation has been shaped largely by the experiences of professional and managerial workers - the target of their demands has been the archetypal fixed schedule of a full-time, salaried office worker who often puts in far more than the requisite 40 hours a week. As such, the workplace flexibility discussion remains somewhat tone deaf when it comes to the needs of low-wage workers. Low-wage workers face a completely different set of challenges - they are much more likely to be paid hourly, work less than full time, and have erratic schedules with little advance notice of when they are expected to work. Their hours - and therefore pay - often vary from week to week and even month to month. So while full-time professional and managerial workers have sought flexibility ------------------------- <2> Cauthen, Nancy K. "Scheduling Hourly Workers: How Last Minute, 'Just-In-Time' Scheduling Practices Are Bad for Workers, Families and Business." Dmos (2011). AB 2448 Page G to diverge from rigid schedules, low-wage workers typically need more predictability and stability within fluid schedules. To meet the needs of all workers, we must first change the terms of the workplace flexibility debate. Solutions such as four-day work weeks, varying the start and end time of the work day, or telecommuting can provide critical flexibility for professional and managerial workers. But the term "flexibility" muddies the water when it comes to low-wage hourly workers: over the last couple of decades, such workers have been increasingly subject to greater demands for flexibility for the benefit of their employers. As a result, hourly workers have had to endure more uncertainty in their schedules, greater fluctuations in their hours, and less predictability in the size of their paychecks. The recent trend toward "just-in-time" scheduling epitomizes the unstable unemployment environment faced by low-wage workers. Just-in-time (JIT) scheduling, also called "scheduling to demand," is a practice that closely links labor supply to consumer demand. Used widely in the service sector, employers rely on scheduling software and measures of demand (such as floor traffic, sales volume, hotel registrations, or dinner reservations) to match workers' hours to labor needs. In doing so, they often change posted schedules at the last minute even if it means sending workers home after they arrive for work or asking them to stay beyond the end of their shift. Such practices can wreak havoc in the lives of workers and their families, complicating child care arrangements, transportation, and eligibility for both employer-sponsored and government benefits. These conditions are challenging not only for parents but can create tremendous chaos and stress for children as well." (Original emphasis included). How Many California Employers Have Established an Alternative Workweek Schedule? The Division of Labor Statistics and Research, under the Department of Industrial Relations, provides on their website a database listing all California employers that have filed alternative workweek election results with the division pursuant AB 2448 Page H to Labor Code section 511(e). According to the database, there are currently 26,016 employers that have successfully established an alternative workweek for their employees. This is an increase from last year, when the database reported that there were 23,929 employers that had successfully established an alternative workweek schedule (and 20,389 the year before that). Recent San Francisco "Family Friendly Workplace Ordinance" On October 1, 2013, the San Francisco Board of Supervisors adopted a "Family Friendly Workplace Ordinance," which went into effect on January 1, 2014. The ordinance is a "right to request" ordinance which, among other things, grants covered employees the right to request changes to help them meet family responsibilities. These workplace changes can include hours of work, work schedules, work location, work assignment, and predictability of work schedule. An employer is required to respond to a request within 21 days. If the employer denies the request, it must do so in writing and explain the reasons for the denial. The employee may then request reconsideration within 30 days. The ordinance also provides that an employer may deny a request based on specified bona fide business reasons. In addition, the ordinance also makes it unlawful for an employer to take adverse employment action against a person because he or she is a "caregiver," as specified. The "Family Friendly Workplace Ordinance" differs from this bill in a number of significant respects. First, the ordinance essentially grants employees the rights to make a request and provides that the employer may deny a request for bona fide business reasons. Under this bill, an employer is not prohibited from denying a request for an alternative workweek for any reason. In addition, unlike this bill, the ordinance does not relieve an employer from the obligation to pay daily overtime under state law for work in excess of eight hours in a workday. AB 2448 Page I ARGUMENTS IN SUPPORT : The author states the following in support of this measure: "The rights of workers and small businesses employees have been exploited by outdated and inefficient workplace and overtime rules. In essence, California law manipulates the lives of Californians by squelching flexibility and imposing rigid limitations on all aspects of work. This creates an untenable situation, making it nearly impossible for employees and their respective employers to reach a mutually agreeable solution that fits the individual needs of the worker and employer. Because existing law does not permit an employer to allow an individual worker to personally choose a flexible work schedule of four 10-hour days per week without overtime being paid, millions of workers consequently are barred from setting a schedule that would best benefit them and their families. California is one of only three states that do not conform to the Federal Fair Labor Standards Act, having some of the most restrictive overtime laws in the nation." Similarly, supporters of this bill argue that the current law covering alternative schedules does not provide flexibility for small businesses. They contend that the rigid controlled process effectively eliminates most employers and employee from choosing schedule options such as flextime, part-time job sharing, telecommuting and compressed workweeks. They argue that this bill helps to address this problem by establishing a voluntary, employee-driven process where the employee can request an alternative workweek schedule of no more than 40 hours per week. Any work performed beyond the schedule would remain subject to current overtime rules. Other supporters, including the California Chamber of Commerce, state that there are currently 26,016 reported alternative workweek schedules on file with DLSE. According to the Employment Development Department's calculations in 2009, there are approximately 1,347,245 employers in California. Therefore, they contend that at best, approximately 2 percent of California employers are utilizing the alternative workweek schedule option. However, more realistically, given that the information AB 2448 Page J in the database is according to work unit instead of employer, it is likely that less than 1 percent of employers in California are utilizing this process. Supporters contend that this bill would relieve employers, especially smaller employers, from the administrative cost and burden of adopting an alternative workweek schedule. ARGUMENTS IN OPPOSITION : Opponents contend that this bill is in direct conflict with decades of worker protection and adopts findings that undermine the very essence of our wage and hour laws. Masked by the term "flexible work schedules," this bill could permit unscrupulous employers to force ten-hour schedules on employees who fear losing their jobs and lack the financial resources to sustain themselves and their families while an employment claim is pending. Opponents argue that the discretion granted to employers in approving employee requests also allows for inconsistent company policies and creates the potential for favoritism. The California Labor Federation, AFL-CIO argues that the reality is that it is the employer who has the most to gain, a significant financial incentive, in moving an employee from daily overtime to weekly overtime. They contend that permitting for individual deals, without the protections of an election or a union, opens the door to all manner of employer pressure, intimidation, and retaliation. They argue that existing law was carefully crafted to balance the interest in flexibility with the need to protect workers. This bill simply does not reflect the reality of the power imbalance in most workplaces where workers are "at will" and can be let go at any time for any reason. RELATED AND PRIOR LEGISLATION : As mentioned above, this bill is the latest in a long (and almost annual) history of bills seeking to amend the overtime and alternative workweek provisions of existing law. This bill is identical to AB 907 (Conway). AB 907 failed passage in this Committee in January of this year. This bill is also identical to SB 607 (Berryhill). SB 607 failed passage in the Senate Committee on Labor and Industrial AB 2448 Page K Relations. This bill is also identical to AB 830 (Olsen) from 2011. AB 830 failed passage in the Assembly Committee on Labor and Employment. SB 367 (Dutton) of 2011 would have permitted an individual nonexempt employee employed by an employer with 25 or fewer employees to request an employee-selected flexible work schedule providing for workdays up to ten hours per day within a 40-hour workweek, and would have allowed the employer to implement this schedule without any obligation to pay overtime compensation. SB 367 failed passage in the Senate Committee on Labor and Industrial Relations. SB 378 (Dutton) of 2011 would have provided that an alternative workweek schedule adopted pursuant to existing law may include a regularly scheduled alternative workweek that authorizes work by the affected employees for more than ten hours a day, as long as the employees are paid at the appropriate overtime rate. The bill further would have exempted from current law employers with five or fewer employees, but would have permitted such employers and their employees to voluntarily enter into a revocable written agreement setting forth an alternative workweek schedule that allows an employee to work up to ten hours a day, 40 hours a week, without the payment of overtime wages. Testimony was taken on SB 378 in the Senate Committee on Labor and Industrial Relations, but a vote was never taken. Over the past several years, the following bills have been introduced which were similar, but not identical, to the current proposal. Each of the following bills failed passage in the first policy committee: SB 1335 (Cox) of 2010 SB 187 (Benoit) of 2009 AB 2127 (Benoit) of 2008 AB 510 (Benoit) of 2007 AB 2217 (Villines) of 2006 SB 1254 (Ackerman) of 2006 AB 640 (Tran) of 2005 AB 244 (Maze) of 2003 REGISTERED SUPPORT / OPPOSITION : AB 2448 Page L Support Air Conditioning Trade Association Associated Builders and Contractors - San Diego Chapter Associated Builders and Contractors of California Associated General Contractors Brawley Chamber of Commerce California Association for Health Services at Home California Association of Winegrape Growers California Automotive Business Coalition California Chamber of Commerce California Chapter of American Fence Association California Fence Contractors' Association California Grocers Association California Hospital Association California Manufacturers and Technology Association California Pool and Spa Association California State Council of SHRM Central Coast Human Resource Association Chambers of Commerce Alliance of Ventura and Santa Barbara Counties Coalition of Small and Disabled Veteran Businesses Flasher Barricade Association Fullerton Chamber of Commerce Greater Riverside Chamber of Commerce Huntington Beach Chamber of Commerce Marin Builders Association National Federation of Independent Business Oxnard Chamber of Commerce Palm Desert Area Chamber of Commerce Pleasanton Chamber of Commerce Plumbing-Heating-Cooling Contractors Association of California Redondo Beach Chamber of Commerce Society for Human Resource Management in California San Jose Silicon Valley Chamber of Commerce Santa Clara Chamber of Commerce Simi Valley Chamber of Commerce South Bay Association of Chambers of Commerce Southwest California Legislative Council The Chamber of the Santa Barbara Region United Chambers of Commerce of the San Fernando Valley Valley Industry and Commerce Association Visalia Chamber of Commerce Western Electrical Contractors Association Wine Institute AB 2448 Page M Sacramento Area Human Resources Association Opposition California Conference of Machinists California Conference of the Amalgamated Transit Union California Labor Federation, AFL-CIO California Nurses Association California Professional Firefighters California Teamsters Public Affairs Council Engineers & Scientists, Local 20 International Longshore and Warehouse Union, Coast Division Professional & Technical Engineers, Local 21 State Building and Construction Trades Council of California UNITE HERE Utility Workers Union of America, Local 132 Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091