BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 168|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 168
Author: Monning (D)
Amended: 4/8/13
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 3-1, 3/13/13
AYES: Lieu, Leno, Lara
NOES: Wyland
NO VOTE RECORDED: Padilla
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Farm labor contractors: successors: wages and
penalties
SOURCE : California Rural Legal Assistance Foundation
DIGEST : This bill holds the successor of a farm labor
contractor (FLC) liable for the predecessors owed wages or
penalties to former employees whether the predecessor was
licensed or not, if the successor FLC meets one or more
specified criteria.
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% interest.
Existing law designates a FLC as any person who, for a fee:
CONTINUED
SB 168
Page
2
1. 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.
2. Recruits, solicits, supplies, or hires workers on behalf of
any employer engaged in the growing or producing of farm
products.
3. 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.
Existing law requires a license issued by the Labor Commissioner
(Commissioner) before a person can act as a FLC.
Existing law states that upon final determination of the
Commissioner that a grower, a FLC, or person acting in the
capacity of a FLC has failed to pay wages to its employees, the
grower, FLC, or person acting in the capacity shall immediately
pay those wages. If payment is not made within 30 days the
Commissioner shall forward the matter to the local district
attorney's office.
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. Employs 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,
CONTINUED
SB 168
Page
3
or director of the predecessor employer or of any person who
has a financial interest in the predecessor employer.
This bill holds a successor to any FLC 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
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.
Prior Legislation
AB 1688 (Goldberg, Chapter 825, Statutes of 2003) enacted
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
CONTINUED
SB 168
Page
4
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 this bill.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 4/15/13)
California Rural Legal Assistance Foundation (source)
California Communities United Institute
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation, AFL-CIO
California Teamsters Public Affairs Council
Engineers and Scientists of California
International Longshore and Warehouse Union
Professional and Technical Engineers, Local 21
The Wage Justice Center
UNITE HERE!
United Farm Workers
United Food and Commercial Workers Union, Western States Council
Utility Workers Union of America, Local 132
OPPOSITION : (Verified 4/15/13)
California Association of Nurseries and Garden Centers
California Association of Wheat Growers
California Bean Shippers Association
California Chamber of Commerce
California Citrus Mutual
California Cotton Ginners Association
California Cotton Growers Association
California Farm Bureau Federation
California Grain and Feed Association
California Grape and Tree Fruit League
California Pear Growers Association
California Seed Association
California State Floral Association
California Tomato Growers Association
Civil Justice Association of California
CONTINUED
SB 168
Page
5
Construction Employers' Association
Nisei Farmers League
Pacific Egg and Poultry Association
Western Agricultural Processors Association
Western Growers Association
Wine Institute
ARGUMENTS IN SUPPORT : The sponsor of this bill, the
California Rural Legal Assistance Foundation (CRLA), believes
this bill prevents licensed or unlicensed 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
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 proponents
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 CRLA 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' FLC businesses
as the Legislature provided to garment and carwash workers -
specifically drawing attention to the California Courts decision
to uphold the successorship provisions.
ARGUMENTS IN OPPOSITION : Opponents argue:
Given the ambiguity of the term "successor," it could
unfairly impose wage and hour liability onto entities and
individuals who had no control, connection, or ability to
CONTINUED
SB 168
Page
6
affect the working conditions and payment of wages to the
employees whom are owed.
The imposition of liability on a "bona fide successor," is
based upon fundamental fairness. Specifically, prior to
holding a successor entity liability for the actions of its
predecessor, courts generally look towards (1) the level of
continuity between the predecessor and successor and (2)
whether the successor had adequate notice of the potential
liability. If both of these factors are satisfied, courts
have generally determined that the principles of equity
require the successor to satisfy the obligations of the
predecessor. Steinbech v. Hubbard, 51 F.3d 843, 845-846 (9th
Cir. 1994). Likewise, if one or both of the factors are not
satisfied, the successor is generally not held liable for the
actions of the predecessor.
Absent such a fundamental analysis of the relationship
between the predecessor and successor, an innocent and
unaware entity or individual could be unfairly strapped with
the liability of a prior bad actor. Specifically, unless the
term "successor" in SB 168 is adequately defined to mirror
the common law definition of "bona fide successor," a
subsequent employer in the same line of business as the
predecessor could be liable for the wage and hour violations
of the predecessor simply because the subsequent employer
hired one of the predecessor's employees. This provision
alone would completely discourage a subsequent employer from
hiring any of the predecessor's workers. Moreover, the
principles of equity certainly require a stronger connection
between the predecessor and subsequent employer, other than
the hiring of one employee or even a familial connection,
before imposing the liability onto the successor.
PQ:k 4/15/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED
SB 168
Page
7
CONTINUED