BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: March 13, 2013 2013-2014 Regular
Session
Consultant: Deanna D. Ping Fiscal: Yes
Urgency: No
Bill No: SB 168
Author: Monning
As Introduced/Amended: February 4, 2013
SUBJECT
Farm labor contractors: successors: wages and penalties.
KEY ISSUE
Should the legislature hold the successor of a farm labor
contractor liable for the predecessor's owed wages or penalties
to former employees?
ANALYSIS
Existing law 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 10 percent interest. (Labor Code §1194.2
and Civil Code § 3289)
Existing law designates a farm labor contractor as any person
who, for a fee:
employs workers to render personal services in
connection with the production of any farm products to,
for, or under the direction of a third person
recruits, solicits, supplies, or hires workers on
behalf of any employer engaged in the growing or producing
of farm products
provides one of the following services: furnishes board,
lodging, or transportation for those workers; supervises,
times, checks, counts, weighs, or otherwise directs or
measure their work; or disburses wage payments to these
persons. (Labor Code §1682)
Existing law requires a license issued by the Labor Commissioner
before a person can act as a farm labor contractor. (Labor Code
§1683)
Existing law states that upon final determination of the Labor
Commissioner that a grower, a farm labor contractor, or person
acting in the capacity of a farm labor contractor has failed to
pay wages to its employees, the grower, farm labor contractor,
or person acting in the capacity shall immediately pay those
wages. If payment is not made within 30 days the Labor
Commissioner shall forward the matter to the local district
attorney's office. (Labor Code §1697.3)
Existing law states that a successor to any employer that is
engaged in sewing or assembly of garments or car washing and
polishing is liable for the predecessor's former employees owed
wages and penalties if the successor meets any of the following
criteria:
1) Uses substantially the same facilities or work force to
produce substantially the same products for substantially
the same type of customers as the predecessor employer
2) Shares in the ownership, management, control of labor
relations, or interrelations of business operations with
the predecessor employer
3) Has in its employ in a managerial capacity any person
who directly or indirectly controlled the wages, hours, or
working conditions of the affected employees of the
predecessor employer
4) Is an immediate family member of any owner, partner,
officer, or director of the predecessor employer or of any
person who has a financial interest in the predecessor
employer (Labor Code §2684 and §2066)
This Bill would hold a successor to any farm labor contractor
Hearing Date: March 13, 2013 SB 168
Consultant: Deanna D. Ping Page 2
Senate Committee on Labor and Industrial Relations
business liable for owed wages or penalties to former employees
if any of the following criteria is met:
1) Uses substantially the same facilities or workforce to
offer substantially the same services as the predecessor
2) Shares in the ownership, management or control of the
workforce
3) Employs in a managerial capacity anyone who directly or
indirectly controlled the wages or working conditions of
the employees of the predecessor employer
4) Is an immediate family member of any owner, partner,
officer, licensee or director of the predecessor employer
or of any person who had a financial interest in the
predecessor employer
COMMENTS
1. Succession Provisions in the Garment and Car Wash Industry
In 1999, Assembly Member Steinberg introduced AB 633 - a bill
that sought to stunt the growing underground economy's
violations of wage and hour, safety, and tax laws. Proponents
of the bill argued that employers cheated workers out of
billions of dollars in wages owed to them under minimum wage
and overtime statute, but current law did not adequately deter
and penalize employers for such violations. Proponents
specifically targeted the garment manufacturing industry
because of the proliferation and poor working conditions of
sweatshops. AB 633 included a variety of provisions from
providing employees the right to recover civil penalties to
establishing successor liability for owed wages and penalties
if the successor also engaged in the business of garment
manufacturing and meets specified criteria including the use
of substantially the same facilities, sharing in the ownership
or management, or employing managers from the predecessor
employer. The bill passed through both houses and was signed
by the Governor that September.
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Senate Committee on Labor and Industrial Relations
A few years later AB 1688 passed in both houses and was signed
by the Governor in 2003. The bill aimed to regulate the
employment of workers in the car washing and polishing
industry. The bill included required annual registration of
employers in the car washing and polishing industry and
failure to register penalties. AB 1688 also included a
successor liability provision that was almost identical to AB
633. Proponents of this bill similarly argued that the measure
would prevent sweatshop-like conditions in the car wash
industry and ensure workers get paid the required wage.
2. Need for this bill?
SB 168 is modeled after the previous legislation discussed
above that signed into law a successor provision for the
garment manufacturing and car wash industry in 1999 and 2003
respectively. The measure aims to hold a successor to a
licensed or unlicensed farm labor contractor liable for the
owed wages or penalties of the predecessor's former employees
if they meet specified criteria.
3. California Courts and Successorship Provisions:
In People ex rel. Harris v. Sunset Care Wash, LLC (205 Cal.
App. 4th, 2012) the plaintiff filed an action against Sunset
Car Wash, LLC to recover unpaid wages and penalties owed by
the defendant Auto Spa Express, Inc. which had operated a
carwash at the same location before being evicted by the
property owner. The trial court denied a motion for summary
judgment filed by Sunset Carwash and ruled that because it
operated at the same location and performed the same services
it was considered a successor under Labor Code section 2066.
In its decision the Court noted that the Legislature was
motivated to enact the Section 2066 provisions by its findings
that carwash operators sometimes employed practices that
resulted in state labor law violations.
4. Proponent Arguments :
The sponsor of this measure, the California Rural Legal
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Senate Committee on Labor and Industrial Relations
Assistance Foundation (CRLA), believes SB 168 would prevent
licensed or unlicensed Farm Labor Contractors (FLC) from
engaging in wage theft. According to CRLA, there have been
numerous instances where employees attempt to recover their
unpaid wages and applicable penalties for non-payment of wages
through the Labor Commissioner and find that the offending FLC
has gone out of business. However, CRLA contends that the FLC
has not really gone out of business, but instead reorganized
with family members or former associate and nominally running
the business under a different (or new) FLC license and name.
The sponsors specifically point out the experience of one
family for which CRLA is trying to collect lost wages but the
FLC has reorganized no less than six times - each time with a
different name and different family member or associate
holding the license.
The sponsor also asserts that although several complaints have
be filed with the Department of Labor Standards Enforcement
(DLSE) about improper FLC licenses being issued to individuals
or entities created solely to avoid prior obligations, DLSE
has not had a system in place to prevent this problem from
occurring. CRLA maintains that a law that makes FLC successors
liable for the unpaid wages of FLC predecessors would
eliminate the incentive to create false FLC licensees and help
ensure that workers are paid what they are owed.
Lastly, CRLA argues that farm workers should be provided with
the same protections from fraudulent 'successor' farm labor
contractor businesses as the Legislature provided to garment
and carwash workers - specifically drawing attention to the
California Courts decision to uphold the successorship
provisions.
5. Opponent Arguments :
None received.
5. Prior Legislation :
AB 1688 (Goldberg), Chapter 825, Statutes of 2003, enacted
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Senate Committee on Labor and Industrial Relations
regulations for the car wash industry including registration
and bonding requirements, as well as protections against
'successor' entities avoiding previous judgments for unpaid
wages or penalties.
AB 633 (Steinberg), Chapter 554, Statutes of 1999, enacted
reforms that increased regulation of garment manufacturers and
contractors including a 'successor' provision that is
substantively identical to SB 168.
SUPPORT
CA Rural Legal Assistance Foundation (Sponsor)
California Labor Federation, AFL-CIO
The Wage Justice Center
OPPOSITION
None on file.
Hearing Date: March 13, 2013 SB 168
Consultant: Deanna D. Ping Page 6
Senate Committee on Labor and Industrial Relations