BILL ANALYSIS                                                                                                                                                                                                    



                                                                            



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                                    THIRD READING


          Bill No:  SB 435
          Author:   Padilla (D)
          Amended:  4/16/13
          Vote:     21


           SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE  :  4-1, 4/10/13
          AYES:  Lieu, Leno, Padilla, Yee
          NOES:  Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8


           SUBJECT  :    Compensation:  piece-rate workers:  rest and  
          recovery periods

           SOURCE  :     California Rural Legal Assistance Foundation


           DIGEST  :    This bill extends existing rest period protections  
          available within the Industrial Welfare Commission (IWC) wage  
          orders to workers paid on a "piece-rate basis" as well as make  
          them applicable during an employee's recovery period, or to  
          employees exempt under law, as specified.

           ANALYSIS  :    

          Existing law establishes, within the Department of Industrial  
          Relations (DIR), the following entities:  

          1.IWC:  to regulate employee wages, hours and working  
            conditions.  (Labor Code Sections 70-74)

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          2.Division of Occupational Safety and Health (Cal/OSHA):  tasked  
            with the responsibility of protecting workers and the public  
            from safety hazards through its various programs.

          3.Occupational Safety and Health Standards Board (OSHSB):  to  
            adopt reasonable and enforceable standards at least as  
            effective as federal standards.

          4.Division of Labor Standards Enforcement:  to adjudicate wage  
            claims, investigate discrimination and public works  
            complaints, and enforce Labor Code and IWC wage orders.

          Existing law, with certain exceptions, defines a day's work as  
          eight hours of labor.  Any additional hours worked in excess of  
          eight hours in one day, or a 40-hour workweek, must be  
          compensated with the payment of overtime.

          Regarding meal and rest periods, existing law requires the  
          following:

          1.Meal Periods:  An employer may not employ a worker for a  
            period of more than five hours per day without providing the  
            employee with a meal period of not less than 30 minutes,  
            except that if the total work period per day is no more than  
            six hours, the meal period may be waived by mutual consent of  
            both parties.  A second 30 minute meal period is required if  
            an employee works more than ten hours per day, except if total  
            hours worked is no more than 12, the second meal period may be  
            waived by mutual consent only if the first meal period was not  
            waived.

          2.Rest Periods:  IWC wage orders require that employers  
            authorize and permit nonexempt employees to take a rest period  
            that must, insofar as practicable, be taken in the middle of  
            each work period.  The rest period is based on the total hours  
            worked and must be at the minimum rate of a net 10 consecutive  
            minutes for each 4 hour work period, or major fraction  
            thereof.  A rest period is not required for employees whose  
            total daily work time is less than 3.5 hours.  According to  
            the IWC wage orders, authorized rest periods are counted as  
            time worked and therefore, must be paid by the employer.

          Under existing law, no employer shall require any employee to  
          work during any meal or rest period mandated by an applicable  

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          order of the IWC.  If an employer fails to provide an employee a  
          meal period or rest period in accordance with an applicable  
          order of the IWC, the employer shall pay the employee one  
          additional hour of pay at the employee's regular rate of  
          compensation for each work day that the meal or rest period is  
          not provided.  (Labor Code Sec.226.7)

          This bill extends existing rest period protections available  
          within the IWC wage orders to workers paid on a "piece-rate  
          basis" as well as make them applicable during an employee's  
          recovery period, as specified.

          Specifically, this bill:

          1.Defines "piece-rate basis" as a method of payment based on  
            units of production earned by an employee during a work day or  
            pay period, or any fraction thereof. 

          2.Adds to the existing IWC wage order requirements regarding  
            meal and rest periods, the following:  

               A.     Prohibits an employer from requiring an employee to  
                 work during any meal, rest or recovery period mandated  
                 pursuant to any applicable statute, regulation, or  
                 standard of the Occupational Safety and Health Standards  
                 Board (OSHSB), or the Division of Occupational Safety and  
                 Health (Cal/OSHA). 

               B.     Extends the requirement that employers pay one  
                 additional hour for failure to provide a meal, rest or  
                 recovery period as required by applicable statutes,  
                 regulations, or standards of the OSHSB or Cal/OSHA. 

               C.     Provides that rest or recovery periods mandated  
                 pursuant to any statute, regulation, standard, or order  
                 of the IWC, the OSHSB, or Cal/OSHA, shall be counted as  
                 hours worked for which there shall be no deduction from  
                 wages.  [IWC orders already require -this bill would  
                 codify the requirement] 

               D.     Specifies that employees working on a "piece-rate  
                 basis" shall be compensated for rest periods by being  
                 paid his/her average piece-rate wage during each pay  
                 period, or portion of, in which the employee was paid on  

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                 a piece-rate basis.

               E.     Authorizes a piece-rate worker, pursuant to a civil  
                 action or a claim filed with the Division of Labor  
                 Standards Enforcement, to recover his/her unpaid average  
                 piece-rate wage for each rest or recovery period in which  
                 a violation of these provisions occurred.

               F.     Provides that the provisions of this bill do not  
                 apply to an employee whose wages, hours, and working  
                 conditions are covered by a collective bargaining  
                 agreement that expressly addresses rest or recovery  
                 periods for employees paid on a piece-rate basis, or to  
                 employees exempt under the law, as specified.

           Comments
           
          Rest Period Requirements in Statute, Standards and IWC Wage  
          Orders:  
           
           Each of the seventeen (17) IWC wage orders includes a section on  
          rest period requirements - authorizing non-exempt employees to  
          take a rest period at a rate of ten (10) minutes per 4 hours or  
          major fraction thereof.  According to the IWC Wage Orders,  
          authorized rest period time shall be counted as hours worked for  
          which there shall be no deduction from wages. 

          In addition to the IWC wage orders and Labor Code Sec.226.7, the  
          Heat Illness Prevention regulations established by the OSHSB  
          have an additional requirement regarding a rest period  
          applicable to all outdoor places of employment.  Since August  
          2005, employers in the State of California have been required by  
          regulation to protect outdoor employees from the hazard of heat  
          illness.  This regulation was promulgated in response to  
          unusually hot summer temperatures over a wide area of the state  
          which led to a greatly elevated number of cases of serious heat  
          illness in the workplace, including a number of deaths.  This  
          regulation, codified at Title 8 California Code Regulations  
          Section 3395, came about first by adoption of an emergency  
          temporary standard and was followed by adoption of a permanent  
          standard in 2006.  Under these regulations, employees are  
          allowed and encouraged to take a cool-down rest in the shade for  
          a period of no less than 5 minutes at a time when they feel the  
          need to do so to protect themselves from overheating.

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           Prior Legislation
           
          SB 1538 (Alarcon, 2004) would have required employers to pay  
          employees for any rest period mandated by statute, regulation,  
          or order of the IWC and would establish the formula by which the  
          rate of pay would have been determined for the rest periods of  
          piece-rate workers in the agricultural and garment industries,  
          as specified.  Vetoed by the Governor.

          AB 755 (De La Torre, 2005), almost identical to SB 1538,  
          however, AB 755 did not enumerate the formula that would have  
          been used to determine the rate of pay of piece-rate workers,  
          but rather states that it be the "average piece-rate" wage.   
          Vetoed by the Governor.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT  :   (Verified  4/29/13)

          California Rural Legal Assistance Foundation (source) 
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Teamsters Public Affairs Council 
          Engineers & Scientists of California, IFPTE Local 20
          International Longshore & Warehouse Union 
          National Lawyers Guild Labor & Employment Committee 
          Professional and Technical Engineers, IFPTE Local 21
          United Farm Workers 
          United Food and Commercial Workers Western States Council
          UNITE-HERE, AFL-CIO
          Utility Workers Union of America, Local 132

           OPPOSITION  :    (Verified  4/29/13)

          Air Conditioning Trade Association
          California Association of Winegrape Growers
          California Framing Contractors Association
          California Professional Association of Specialty Contractors 
          California Retailers Association 
          National Federation of Independent Business
          Plumbing-Heating-Cooling Contractors Association of California
          Western Electrical Contractors Association 

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           ARGUMENTS IN SUPPORT  :    According to proponents of the measure,  
          this bill will clarify how paid rest breaks and recovery periods  
          are to be compensated by employers when employees are paid on a  
          piece-rate basis.  Proponents argue that piece-rate workers,  
          unlike their hourly or salaried counterparts, are often induced  
          to work through their rest or recovery periods because they  
          suffer a loss of income.  They believe this bill is necessary to  
          increase incentives for piece-rate workers to actually take  
          their rest and heat stress recovery periods rather than  
          "willingly" working through them to avoid losing money.

          According to the sponsor of the measure, a 2004 CA Rural Legal  
          Assistance Foundation survey of more than 1,000 piece-rate farm  
          workers laboring in the raisin harvest, found that more than 70%  
          of workers "voluntarily" worked through rest periods to avoid  
          losing money.  Nearly two-thirds of them said they would be  
          "more likely" to take rest periods if they were paid their  
          average piece-rate earnings during that time.  The sponsors  
          argue that it is significant that these results were obtained  
          from surveying workers in Central Valley raisin harvests where  
          triple digit temperatures have resulted in farm worker deaths  
          from heat stress.  They argue that while not all piece-rate  
          workers potentially face a life or death decision when they are  
          not given their rest periods, compliance by employers with these  
          important state policies should not be so insidiously undermined  
          by the manner in which workers are paid.

           ARGUMENTS IN OPPOSITION  :    Opponents argue that this bill will  
          threaten a new wave of destructive and costly litigation to  
          California employers by including exempt employees under the  
          one-hour penalty for failure of an employer to provide a meal or  
          rest period.  According to opponents, for over ten years, CA  
          employers suffered as a result of class action litigation  
          regarding the meaning of the term "provide" with regard to meal  
          and rest periods for hourly, non-exempt employees.  With this  
          bill, opponents are concerned that the penalty provision of  
          Labor Code Section 226.7 would be significantly expanded to  
          include exempt employees by making the penalty available to not  
          just those employers that fail to comply with the IWC wage  
          orders, but also to any employer who fails to comply with  
          statutory meal and rest period requirements in Labor Code  
          Section 512.


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          Additionally, opponents contend that, as exempt employees,  
          employers do not track such employees' time, thereby making it  
          extremely difficult for employers to adequately and fairly  
          defend themselves in litigation.  Opponents also argue that the  
          proposed definition of piece-rate is also extremely broad, as it  
          could include exempt employees who are paid, in part, a  
          production bonus based upon a specific unit of time, number of  
          items sold, or even certain amount of sales.  Furthermore, they  
          argue that this bill could significantly increase costs for  
          employers who have employees with mandated periods of rest that  
          could be characterized as "recovery periods" subject to  
          compensation.  For example, IWC Wage Order No. 5-2001 mandates  
          that an employee who works 24 consecutive hours must receive at  
          least 8 hours of off-duty time.  It also states that an  
          employee's time spent sleeping is not considered hours worked.   
          Opponents are concerned, that this bill would potentially  
          transform such time spent sleeping or the mandated 8 hours of  
          off-duty time as compensable, as a "recovery period."


          PQ:ej  4/29/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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