BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
SB 713 (Correa)
As Amended April 2, 2013
Hearing Date: May 7, 2013
Fiscal: No
Urgency: No
TW
SUBJECT
Liability: Good Faith Reliance on Administrative Ruling
DESCRIPTION
This bill would provide that any person who relies upon a
written order, ruling, approval, interpretation, or enforcement
policy of a state agency or department, except the Division of
Labor Standards Enforcement (DLSE), is not liable or subject to
punishment for a violation of a civil statute or regulation in a
judicial or administrative proceeding if the person pleads and
proves to the trier of fact that, at the time of the alleged act
or omission, the person, acting in good faith, did all of the
following:
sought an applicable written order, ruling, approval,
interpretation, or enforcement policy from the state agency
charged with interpreting that particular area of law;
provided true and correct information to the state agency in
seeking the written order, ruling, approval, interpretation,
or enforcement policy; and
relied upon and conformed to the applicable written order,
ruling, approval, interpretation, or enforcement policy.
This bill, with respect to reliance on a written order, ruling,
approval, interpretation, or enforcement policy of the DLSE,
would provide that a person who takes all of the above acts is
not liable or subject to punishment, except for restitution of
unpaid wages.
BACKGROUND
After the Bacon-Davis Act of 1931 (40 U.S.C.S. Sec. 276a et
(more)
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seq.), the Walsh-Healy Public Contracts Act of 1936 (41 U.S.C.S.
Sec. 35 et seq.), and the Fair Labor Standards Act of 1938 (29
U.S.C.S. Sec. 201 et seq.) were enacted to provide labor
standards and employee protections, Congress found that these
Acts had been "interpreted judicially in disregard of
long-established customs, practices, and contracts between
employers and employees, thereby creating wholly unexpected
liabilities, immense in amount and retroactive in operation,
upon employers. . . ." (29 U.S.C.S. Sec. 251.)
For this reason, Congress enacted the Portal-to-Portal Act of
1947, which was intended to relieve and protect interstate
commerce from practices which burden and obstruct it, protect
the right of collective bargaining, and define and limit the
jurisdiction of the courts. (29 U.S.C.S. Sec. 251.) At that
time and in order to avoid substantial employer losses for labor
violations of the recently enacted statutes, the
Portal-to-Portal Act provided an affirmative defense for
employers who failed to pay minimum wages or overtime
compensation in reliance on the interpretations and opinions of
the Wage and Hour Division of the Department of Labor. (29
U.S.C.S. Sec. 259(a).)
This bill is similar to SB 883 (Correa, 2011), which provided
affirmative defenses for employers similar to those provided
under the Portal-to-Portal Act. The bill would also have
applied to all actions and proceedings that had not resulted in
a final judgment, regardless of whether the action or proceeding
was commenced, or based upon an alleged act or omission that
occurred, before, on, or after the effective date of the bill.
SB 883 was double-referred to the Senate Labor and Industrial
Relations Committee and this Committee. The measure was set for
hearing in the Senate Labor and Industrial Relations Committee
but was pulled from calendar by the author. Additionally, SB
1374 (Harman and Correa, 2012) was substantially similar to this
bill and failed passage in this Committee on a vote of 2-3.
This bill, sponsored by the California Chamber of Commerce,
would shield an individual from liability if he or she relied
upon a written order, ruling, approval, interpretation, or
enforcement policy, as specified.
CHANGES TO EXISTING LAW
Existing federal law , the Portal-to-Portal Act, provides that,
in any action or proceeding based on any act or omission, no
employer shall be subject to any liability or punishment for or
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on account of the failure of the employer to pay minimum wages
or overtime compensation under the Fair Labor Standards Act of
1938, as amended, the Walsh-Healey Act, or the Bacon-Davis Act,
if he pleads and proves that the act or omission complained of
was in good faith in conformity with and in reliance on any
written administrative regulation, order, ruling, approval, or
interpretation, of the agency of the United States, as
specified, or any administrative practice or enforcement policy
of such agency with respect to the class of employers to which
he belonged. (29 U.S.C.S. Sec. 259(a).)
Existing federal law provides that such a defense, if
established, shall be a bar to the action or proceeding,
notwithstanding that after such act or omission, such
administrative regulation, order, ruling, approval,
interpretation, practice, or enforcement policy is modified or
rescinded or is determined by judicial authority to be invalid
or of no legal effect. (Id.)
This bill would provide that any person who relies upon a
written order, ruling, approval, interpretation, or enforcement
policy of a state agency or department, except the Division of
Labor Standards Enforcement (DLSE), is not liable or subject to
punishment for a violation of a statute or regulation in a
judicial or administrative proceeding if the person pleads and
proves to the trier of fact that, at the time of the alleged act
or omission, the person, acting in good faith, did all of the
following:
sought an applicable written order, ruling, approval,
interpretation, or enforcement policy from the state agency
charged with interpreting that particular area of law;
relied upon and conformed to the applicable written order,
ruling, approval, interpretation, or enforcement policy; and
provided true and correct information to the state agency in
seeking the written order, ruling, approval, interpretation,
or enforcement policy.
This bill would provide that a person who relies on a written
order, ruling, approval, interpretation, or enforcement policy
of the DLSE shall not be liable or subject to punishment, except
for restitution of unpaid wages, for a violation of a statute or
regulation in a judicial or administrative proceeding if the
person pleads and proves to the trier of fact that, at the time
the alleged act or omission occurred, the person, acting in good
faith, did the above acts.
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This bill would permit this affirmative defense to apply even
if, after the act or omission occurred, the order, ruling,
approval, interpretation, or enforcement policy upon which the
person relied is modified, rescinded, or determined by a court
to be invalid or of no legal effect.
This bill would specify that the affirmative defense shall not
apply if the alleged act or omission occurred after the order,
ruling, approval, interpretation, or enforcement policy upon
which the person relied is modified, rescinded, or determined by
judicial authority to be invalid or of no legal effect.
This bill would provide that its provisions apply to all actions
and proceedings that commence on or after January 1, 2014.
This bill would provide that nothing in the bill shall be
construed to give any greater legal weight to an order, ruling,
approval, interpretation, or enforcement policy than it would
otherwise have in the absence of the bill.
This bill would specify that nothing in the bill shall be
construed to require a state agency or department to issue an
order, ruling, approval, interpretation, or enforcement policy,
and nothing in the bill shall be construed to authorize a state
agency or department to issue an order, ruling, approval,
interpretation, or enforcement policy that is contrary to an
existing state statute or regulation.
COMMENT
1. Stated need for the bill
The author writes:
Californians are expected and encouraged to seek out guidance
and information from these various agencies to determine how
to comply with California's numerous laws and regulations.
Ironically, however, if an individual or business seeks
guidance from one of these agencies and relies upon the
information they are provided, they are given no protection or
benefit if litigation is ultimately filed to challenge the
agencies' advice.
SB 713 would provide an affirmative defense, in any
administrative or legal action to any person or employer who
can prove he or she relied in good faith on the opinions,
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regulations, guidance, advice, or orders of any state agency
with regard to the challenged act or omission, except with
regard to those opinions received from the DLSE [Department of
Labor Standards Enforcement].
A coalition of business groups in support of this bill write:
California has more than 500 agencies that are charged with
the responsibility and authority to interpret and enforce
laws. Citizens of California are expected and encouraged to
seek out guidance and information from these various agencies
to determine how to comply with California's numerous laws and
regulations. Ironically, however, if an individual or
business seeks guidance from one of these agencies and relies
upon the written determination they are provided, they are
given no protection or benefit if litigation is ultimately
filed to challenge the agencies' advice.
For example, the Division of Labor Standards Enforcement
(DLSE) is a state agency that is charged with the
responsibility and authority to enforce the wage, hour, and
working condition labor laws. As a part of its effort to
fulfill this responsibility, the DLSE issues opinion letters
on various wage, hour, and working condition topics, as well
as an enforcement manual that sets forth the DLSE's
interpretation and position on these issues. Currently,
employers are encouraged to refer to the DLSE's written
materials for "guidance" on these topics when there is no
published, on-point case available. However, employers are
provided with no certainty that they will be shielded from
liability if they comply in good faith with the DLSE's written
opinions or interpretations.
SB 713 eliminates this problem and provides employers and
residents of California with the security to know that if they
proactively seek out and receive written advice from state
agencies regarding how to comply with the law, they can
actually rely upon that information. SB 713 provides such
citizens with legal protection if their actions are challenged
in litigation and they can prove that their actions were based
upon written guidance received from a state agency. This
policy provides credibility to California's state agencies
charged with the responsibility to interpret and enforce such
laws and will help to alleviate the negative public perception
of state government.
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SB 713 will not protect any unscrupulous employer that is
operating in the underground economy. Specifically, in order
to obtain the legal protection offered under SB 713, an
employer must prove the following: (1) it proactively sought
out the advice or guidance from the state agency; (2) the
employer must also establish that it provided the state agency
with accurate information; [and] (3) the employer conformed
its behavior to the guidance received. Not only is an
employer operating in the underground economy unlikely to
voluntarily establish a connection with any state agency, but
also such an employer would never be able to establish these
requisite factors.
SB 713 also will not deny any employee wages he or she is
rightfully owed. Under SB 713, if an employer receives advice
from the DLSE regarding how to comply with wage and hour laws,
and a court later disagrees with the DLSE's opinion, the
employer would be required to make the employee whole with
payment of any owed wages. However, SB 713 would
simultaneously prevent any penalties or fines assessed against
the employer, as the employer was simply relying upon the
written advice received from the DLSE.
. . .
[U]ncertainty for California citizens regarding the correct
application of California's numerous laws and regulations
detrimentally impacts the state's economy and is a significant
burden for those trying to conduct business. Providing
certainty through SB 713 will assist in relieving this burden
on employers and every other citizen of California, thereby
producing a better business environment, growth in the
economy, and improve public perception of our government.
2. Portal-to-Portal Act
This bill would allow an employer, in reliance on a written
order of the Division of Labor Standards Enforcement (DLSE), to
claim an affirmative defense against an employee's wage claim if
the employer proves that he or she sought an applicable order
from the DLSE and relied upon and conformed to the order. This
affirmative defense is similar to that provided under the
Portal-to-Portal Act, which allows an employer to escape
liability for Federal Labor Standards Act (FLSA) violations if
the employer shows that it acted in good faith conformity with,
and in reliance upon, a written regulation, order, ruling,
approval, or interpretation of Department of Labor's Wage and
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Hour Division, or any administrative practice or enforcement of
the Division with respect to the class of employers to which it
belonged. (29 U.S.C.S. Sec. 259.)
Supporters of this bill argue that, under existing law,
"employers are provided with no certainty that they will be
shielded from liability if they comply in good faith with the
DLSE's written opinions or interpretations." Supporters
continue:
[T]he federal government allows the same defense for employers
who rely in good faith upon the advice, opinion letters, and
guidance of the Department of Labor regarding the Fair Labor
Standards Act. See 29 U.S.C. sections 258-259. In its
findings and declaration of policy regarding the
Portal-to-Portal Act, in which this affirmative defense is
found, Congress recognized that 'uncertainty on the part of
industry,' as well as 'the difficulties in the sound and
orderly conduct of business and industry,' could negatively
impact commerce. Accordingly, Congress enacted the
Portal-to-Portal Act, which included this affirmative defense
for employers who rely upon the interpretations and opinions
of the Wage and Hour Division of the Department of Labor.
On the other hand, Consumer Attorneys of California argue in
opposition that this bill "would greatly limit the enforcement
powers of the [DLSE.] The [DLSE] is the state agency
responsible for adjudicating wage claims, investigating
discrimination and public works complaints, and enforcing the
Labor Code and Industrial Welfare Commission [IWC] orders. As
such, they are tasked with important enforcement powers to carry
out our state and federal labor laws. Under SB 713, this agency
would be barred from punishing employers for violations of our
labor laws except for the recovery of unpaid wages as long as
the employer can argue that they relied on some statement or
policy of a staffer within the agency. This would insulate
employers even where a state or federal law is violated." The
California Employment Lawyers Association (CELA), also in
opposition to this bill, states:
SB 713 would gut the power of the Labor Commissioner to
enforce the Labor Code. . . . The exception created for DLSE
enforcement actions exposes the true intent of SB 713, as well
as its flaws. Not only is there no rational basis for the
carve-out of the DLSE from the general scheme envisioned by
the bill, the Labor Code already offers many examples of the
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kind of "good faith" protections the bill purportedly
advocates for.
. . .
In practical terms, the bill would give agency opinion letters
the force of law, which is more than such letters are intended
to have. The inherent limitation of an opinion letter - even
from a well-respected government agency - has long been
recognized by our courts. In fact, it is a well-settled
judicial tenet founded on sound public policy that limits the
force of an opinion letter. As the California Supreme Court
reaffirmed in its long-awaited decision last year in Brinker
Rest. Corp. v. Superior Court, 53 Cal.4th 1004[, 1029] (2012):
The DLSE is the state agency empowered to enforce
California's labor laws, including IWC wage orders. . . .
The DLSE's opinion letters, while not controlling upon the
courts by reason of their authority, do constitute a body
of experience and informed judgment to which courts and
litigants may properly resort for guidance.
. . .
The reasons for this are plain. Opinion letters typically
arise out of a limited set of facts presented by employers -
often as part of a hypothetical situation, and always without
an actual body of evidence for a trier of fact to weigh. As
the Supreme Court stated, opinion letters are by definition,
meant to be "instructive" and not binding - precisely because
the "record" upon which they are based is sparse.
SB 713, however, would create immunity where a
hypothetical-driven opinion letter hewed closely enough to the
facts of an actual case or controversy. If the facts
described in an opinion letter are close, therefore, the
employer or business will be able to prove they relied in good
faith on the opinion letter.
Further, the California Rural Legal Assistance Foundation
(CRLA), in opposition, argues that:
One of the most frequent citations issued by the [DLSE] is
failure to carry workers compensation insurance.
Agriculture is one of the state's most dangerous industries,
where there are frequent very serious farm worker injuries and
deaths. Under SB 713, these could go uncompensated if the
employer is uninsured, but was arguably in some level of
general vague compliance with a written policy issued re: the
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general activity associated with the death/injury.
In such a case - where the employer also had some provable
responsibility or involvement in directing or allowing the
activity in circumstances that led to or were at least
partially responsible for the death/injury - it is likely that
an employee (or his/her estate) is going to sue the uninsured
employer for damages needed to make the worker whole.
We believe it is likely that the suit will be defended by
asserting SB 713's affirmative defense to liability (arguing
that the death/injury was generally related to a practice for
which the employer sought written guidance and which he/she
relied on and conformed to). Even if this defense is not
ultimately successful, it will be a significant obstacle to a
worker being made whole for the injury/death, perhaps
especially in rural conservative courts.
Notably, courts have held that a good faith defense under the
Portal-to-Portal Act relieves an employer for liability for
liquidated damages under collective bargaining agreements "'if
the employer shows to the satisfaction of the court that the act
or omission giving rise to such action was in good faith and
that [the employer] had reasonable grounds for believing that
[its] act or omission was not a violation of the [FLSA].'"
Thomas v. Howard Univ. Hosp. (1994) 39 F.3d 370, 372. The
Thomas court reasoned as follows:
The Portal-to-Portal Act added another provision, the one with
which we are concerned, giving courts discretion to disallow
liquidated damages "if the employer shows to the satisfaction
of the court that the act or omission giving rise to such
action was in good faith and that [the employer] had
reasonable grounds for believing that [its] act or omission
was not a violation of the Fair Labor Standards Act." . . .
In most instances an employer will be able to satisfy
[Section] 260's "reasonable grounds" requirement only if it
has relied on a reasonable, albeit erroneous, interpretation
of the [FLSA] or of the regulations issued thereunder. . . .
Relief for employers in those circumstances was at the heart
of the Portal-to-Portal Act of 1947. At the time, judicial
interpretations contrary to "long-established customs,
practices, and contracts" had created "wholly unexpected
liabilities" for overtime compensation, "including liquidated
damages." . . . In actions commenced after [Section] 260's
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effective date, Congress gave the courts discretion to reduce
the liability of those employers surprised by a judicial or
administrative interpretation of the Fair Labor Standards Act
-- employers, that is, who had reasonable grounds for thinking
the law was other than it turned out to be. (Id. at 373;
internal citations omitted.)
As such, with respect to violations of overtime compensation
claimed by an employee, as long as the employer reasonably
relied, mistakenly, on an interpretation of the FLSA, the
employer could avoid liability for liquidated damages simply
because of a good faith belief that the overtime compensation
was being properly computed.
This bill potentially would allow an employer, relying on a
mistaken interpretation of law, to avoid damages to the
detriment of the employee. This bill would apply even if, after
the act or omission occurred, the order, ruling, approval,
interpretation or enforcement policy upon which the employer
relied is later modified, rescinded, or determined by a court to
be invalid or of no legal effect.
3. Precedence of affirmative defense of reliance on public agency
opinion
In addition to wage cases, this bill would apply to any and all
persons who are involved in litigation based upon a violation in
which the defendant may claim an affirmative defense for relying
on a state agency order. This affirmative defense has the
effect of eliminating a court's discretion over whether the
individual was civilly liable for harm caused by the violation.
Supporters argue that "[t]here is already precedent in the law
for giving individuals protection when they rely on the advice
of government."
a. Taxpayer relief
For example, the author states that California taxpayers, who
fail to pay taxes because they reasonably relied on the
written advice of the California Franchise Tax Board (FTB),
can be relieved of all taxes, interest, and penalties.
The California Taxpayers Bill of Rights, Revenue and Taxation
Code Section 21012(a), provides taxpayers relief from assessed
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taxes, interest and penalties in certain situations where
taxpayers relied upon written advice of the FTB. In order to
receive relief from taxes, interest, and penalties, the
taxpayer must meet several criteria as follows:
the person or representative requested in writing that
the FTB advise him or her whether a particular prospective
activity or transaction is subject to tax, and fully
described the facts and circumstances of the transaction or
activity in the request;
FTB responded in writing, stating whether the described
activity is subject to tax, or stating the conditions under
which the activity or transaction is subject to tax;
the person reasonably relied upon the advice and did not
remit the tax due; and
the ruling has not been rescinded or revoked before the
taxpayer relied upon it or before the occurrence of the
transaction or activity. (FTB Notice 2009-09.)
FTB Notice 2009-09 also provides that under no circumstances
may a taxpayer rely upon an FTB Chief Counsel Ruling issued to
another taxpayer. Further, in order for a taxpayer to receive
relief from failing to pay taxes, the original request or
application for exemption must not have contained any
misrepresentation of material facts.
Similarly, this bill would require the person claiming the
affirmative defense to have provided true and correct
information to the state agency in seeking the written order,
ruling, approval, interpretation, or enforcement policy.
Notably, because this bill requires the person arguing for the
affirmative defense to have sought the order and provide true
and correct information to the state agency, this bill could
not provide an affirmative defense to another person, who had
not personally sought the order and provided information to
the state agency. However, this bill would relieve the
defendant from liability based upon the defendant's
interpretation of the agency's opinion, leaving the court to
decide whether the interpretation was reasonable under the
circumstances claimed by the defendant.
Importantly, the California Taxpayers Bill of Rights only
affects the liability of a taxpayer to the state agency
issuing the opinion. However, this bill would affect an
entity's liability, or lack of liability based upon the state
agency's opinion, to a third party (employee or citizen),
which fundamentally alters the third party's rights against
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the entity.
a. Employer relief
Supporters also argue that there is precedence for this bill
in the Portal-to-Portal Act, which provides employers
protection from liability when they reasonably rely on a DLSE
order. The court in Thomas v. Howard Univ. Hosp. (1994) 39
F.3d 370 provided an instructive discussion on the need for
enacting the Portal-to-Portal Act as follows:
Section 207(a)(1) of the Fair Labor Standards Act of 1938,
commonly known as the "maximum hours provision," entitles
an employee who works more than forty hours in a "workweek"
to receive from his employer "one and one-half times the
regular rate at which he is employed" for such "excess"
work. . . . The original Act rendered employers who
violated the maximum hours provision automatically liable
not only for unpaid overtime compensation, but also for an
equivalent amount in "liquidated damages." . . . In the
mid-1940's, the Supreme Court construed - or as a later
Congress thought, misconstrued - "workweek" to include
activities preliminary and incidental to the employee's
work. . . . This construction retroactively transformed
the workweeks of thousands of employees into more than
forty hours and laid at the doors of their employers
millions of dollars in "wholly unexpected liabilities" for
overtime compensation and liquidated damages. . . .
Congress took quick, corrective action, passing the
Portal-to-Portal Act of 1947 . . . to extinguish those
"unexpected liabilities," and to define "workweek" to
exclude certain preliminary activities. (Id. at 371.)
Given that the Portal-to-Portal Act was enacted to mitigate
unexpected liabilities resulting from the vast changes in
federal labor laws, the Committee should consider whether this
bill is necessary since there is no demonstrated impending
crisis necessitating the broad affirmative defense provided in
this bill.
4. Constitutional roles of legislative and judiciary branches of
government
Opponents also argue that this bill, by vesting in state
agencies the interpretation of and resulting changes to laws,
would usurp the Legislature and judiciary branches of government
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and lead to increased politicization of agency opinions.
CELA, in opposition, argues that:
Though SB 713 describes the role of the state agencies as
those that are "charged with interpreting that particular area
of law," (see Proposed Civ. [Code Sec.] 1713.5(a)(1)),
"interpretation" of laws is the exclusive province of the
judiciary - not the departments that comprise the executive
branch. See California Teachers Assn. v. Governing Bd. Of
Rialto Unified Sch. Dist., 14 Cal.4th 627, 633 (1997) ("[A]s
this court has often recognized, the judicial role in a
democratic society is fundamentally to interpret laws, not to
write them."); United States v. Nixon, 418 U.S. 683, 703
(1974) ("Many decisions of this Court, however, have
unequivocally reaffirmed the holding of Marbury v. Madison
(1803), that '(i)t is emphatically the province and duty of
the judicial department to say what the law is.'").
SB 713, however, would effectively vest that duty with state
agencies, whose "interpretation" of the law would confer
immunity on businesses. The bill would allow businesses to
escape liability for their unlawful actions if the business 1)
provides "true and correct information" to a State agency in
seeking a legal opinion; and 2) relied upon the opinion. (See
Proposed Civ. [Code Sec.] 1713.5(a)(1)-(3).) This immunity
from liability would apply even if the California Supreme
Court later decides that the agency's opinion was wrong,
contrary to established law, or even unconstitutional. . . .
Unjust outcomes resulting from SB 713 are assured and easy to
foresee. Consider the following hypothetical: A business
wishes to dispose of a known toxic substance in a drum made
with a new alloy. The business solicits an opinion from the
Department of Toxic Substances Control (DTSC) to determine if
their hypothetical disposal plan meets state regulatory
requirements. A manager from the DTSC concludes that the plan
appears to comply with DTSC regulations, based on the truthful
representations by the business about its plan, and the
information known to date about the new alloy. A year later,
the alloy fails, the toxic substance leaks into a water
supply, and several people are poisoned.
Under SB 713, the business would have potentially no liability
- criminal or civil - because it operated in "good faith
reliance" on the interpretation of a DTSC manager about the
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lawfulness of the disposal plan. Though a jury or a court may
conclude the plan unequivocally violated DTSC regulations, and
finds the business negligent (even criminally so), the
business "shall not be liable or subject to punishment for a
violation of a statute or regulation in a judicial or
administrative proceeding. . . .
The Consumers for Auto Reliability and Safety (CARS), in
opposition, argues that "SB 713 would allow unelected,
unaccountable low-level state employees to make sweeping changes
to longstanding regulations that affect the economic well-being
and safety of the California public, without a single
legislative policy debate on the merits. Thus, it would also
strip the Legislature and the people's elected representatives
of their proper authority, to the detriment of the entire
state."
CRLA argues that:
Every change in political administration in state government
often leads to charges that subsequent agency decision-making
has been politicized. SB 713 will only exacerbate this
problem by creating in effect a 'get out of jail' card for
employers who succeed in having an agency craft a narrow
exception to otherwise generally applicable prior law or
long-standing interpretation.
The ill-effects of such politicization are readily apparent in
a case such as Hudgins v. Neiman Marcus Group (34 Cal.App.4th
1109[, 1125], 41 Cal.Rptr.2d 46), where the Labor Commissioner
issued a private opinion letter toward the end of the [trial]
court proceeding on the legality of Neiman Marcus' commission
pay policy, which the plaintiff subsequently lost. The Court
of Appeal, in reversing, found, among other things, that the
"labor commissioner's letter was . . . the product of a
nonadversarial, ex parte process conducted at the request of
an organization that exclusively represents the interests of
employers in the retail industry."
As an example of this bill's potentially politicizing effect on
state agencies, the California Labor Federation (CLF) notes
that "[u]nder the Schwarzenegger Administration, the States
Labor Agency issued a number of pronouncements, opinion
letters, enforcement policies, and emergency rules regarding
the right to a lunch break. They were blatantly in violation
of settled laws and sought to shield employers from liability
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for refusing to allow workers to take breaks. Virtually every
action that Administration took on meal periods was
subsequently invalidated by the courts or withdrawn in the face
of public opposition. . . . Had this bill been law, however,
any workers denied meal periods would have been without a
remedy since employers could simply rely on this agency
guidance to violate worker's rights with impunity."
Accordingly, opponents argue that this bill would open the door
to blatant efforts to manipulate agency opinion making, which
in turn could usurp the legislative and judiciary process.
5. Jacobs Farm/Del Cabo, Inc. v. Western Service, Inc.
An additional concern is that this bill would overturn the court
decision in Jacobs Farm/Del Cabo, Inc. v. Western Service, Inc.
(2010) 190 Cal.App.4th 1502, wherein the court found that
California's statutory and regulatory oversight of pesticide use
was intended primarily to ensure safety standards and not to
displace private common law tort remedies for harm caused by
pesticides.
In Jacobs Farm, the defendant claimed a defense based in part
upon collateral estoppel; a deputy commissioner found that the
defendant had not violated the law. The Jacobs Farm court, in
denying the defendant's collateral estoppel claim reasoned:
Almost 60 years ago, the Attorney General issued an opinion
with which we agree today. The opinion was rendered in
response to questions about the effect of the then newly
enacted provisions requiring a permit for the application of
potentially injurious agricultural chemicals. Responding to
concern that compliance with permit requirements might relieve
pesticide applicators from liability for negligent acts, the
Attorney General opined: "Nowhere does it state that if one
has secured the necessary permit and has observed all the
established rules and regulations, he should be held blameless
for his negligent act. The rules and regulations as
established from time to time will undoubtedly indicate the
manner in which an individual who desires to be free of
negligence should operate. The mere fact, however, that he
follows the rules and regulations does not in itself guarantee
he is free of negligence. And nowhere is he relieved of
responsibility for his negligent acts." (18 Ops.Cal.Atty.Gen.
221, 223 (1951).)
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In sum, to the extent defendant argues that the deputy
commissioner's decision should have had some preclusive effect
upon plaintiff's claims for damages, we reject it. In this
regard, the statutory scheme and the common law are
complementary, not conflicting. Plaintiff's lawsuit had no
effect upon the commissioner's ability to regulate pesticide
use or upon the validity of the deputy commissioner's
conclusion as it pertained to defendant's liability under the
pesticide laws. Similarly, the deputy commissioner's
determination that defendant had complied with the law did not
bar plaintiff from pursuing defendant for damages arising from
its alleged lack of due care. (Id. at 1525.)
Opponents argue that this bill could extend the protection from
being sued that is afforded to government employees when they
misinterpret the law to private parties who rely on such
misinterpretations. In the Jacob's Farm case, this would have
meant that the defendant would not have been liable for the
contamination of the organic crops because defendant relied on a
misinterpretation of the pesticide laws by the Agricultural
Commissioner.
Opponents further assert that the Agricultural Commissioners and
the Department of Pesticide Regulation commonly misinterpret the
pesticide laws in this manner and have been under a lot of
political pressure to do so. Volatilization of pesticides and
herbicides is a common phenomenon and will become worse if the
United States Environmental Protection Agency approves a
petition by Dow Chemical Company for 2,4-Dichlorophenoxyacetic
acid (2,4-D) resistant corn. Opponents argue that creating a
law like this bill that allows private parties to hide behind
the immunity granted government employees, who are themselves
subject to political pressure by the very people they are
regulating, is to create even more opportunity for private
parties to pressure government employees to interpret laws in
their favor.
6. Impact on wide range of industries and consumers
Because this bill does not limit the affirmative defense it
creates, this bill would affect a wide range of industries.
Consumer Watchdog, in opposition, notes that "the statutory
immunity that SB 713 proposed to confer on a wide range of
industries would remove a key deterrent to law-breaking: a
requirement that wrongdoers both give back what was stolen and
face consequences for transgressions. If someone sneaks
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dynamite through airport security, nobody would say that the
fact that TSA staff authorized his passage to the terminal
should serve as an affirmative defense against prosecution. But
if SB 713 were enacted, companies ranging from chemical
manufacturers to auto insurance companies to industrial
employers would be incentivized to do the regulatory equivalent
of sneaking dynamite through security, because they would get to
keep illegal overcharges or other benefits received before their
misconduct was discovered and be free from punishment despite
having broken the law." Consumer Watchdog also asserts that
"[a]llowing, as SB 713 would, companies to break California laws
with impunity has no public or consumer benefit. To the
contrary, SB 713 would create moral hazard by reducing the risk
associated with flouting California law."
As an example of the negative effects this bill would have on
consumers, Consumer Watchdog provides:
One industry that would benefit from SB 713 at the expense of
its customers and the public generally is the property and
casualty insurance industry. This bill seeks to eliminate
insurer accountability for any illegal act companies commit if
they claim to be doing it under the cover [of] departmental
approval.
SB 713, for example, would strip insurance policyholders of
their legal rights to obtain refunds in court under the unfair
competition law, in direct contravention of Proposition 103's
establishment of that right. Unfortunately, we have
discovered several forms of illegal discrimination in
insurance over the years, often after insurers implement the
practice. Some examples include insurance companies:
Illegally charging good drivers who had been
uninsured (whether driving or not) at some point in the
past in violation of Insurance Code Section 1861.02(c);
Improperly denying the good driver discount to
otherwise qualified immigrant drivers in violation of
Sections 1861.02 and 1861.025; and
Discriminating against soldiers in the sale of auto
insurance policies in violation of Section 11628 (c),
which prohibits discrimination against service members.
For situations like these, insures may have incorporated some
documentation into their official filings or may have just
discussed the practices with agency staff. To the extent that
there is any documentation of these illegal activities, it may
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have been difficult to discern, incomplete or buried deep
within a filing and otherwise never highlighted.
. . .
SB 713 would allow an insurer to keep its illegal surcharges
no matter how reprehensible its conduct, as long as the
insurer can claim to have relied on some act of a regulator at
some point. Undoubtedly, there are real-world examples from
across the spectrum of regulated industries that would
illustrate how SB 713 would incentivize companies to game the
system and shield themselves from accountability.
CARS, in opposition, states that this bill "would undermine
decades of progress made in California and the nation to improve
protections for the public from unsafe products, price-gouging,
engaging in deceptive acts, and other illegal activity". . . .
7. Impact on state agencies
Opponents of this bill also argue that, if this bill were to
become law, every state agency would be overwhelmed with
lobbyists and businesses soliciting "immunity opinions." CELA
asserts that "[t]he effect on state agencies would be immediate
and profound. Already lobbied for their rule-making authority,
agencies would also be subject to an un-scrutinized effort to
'interpret' the rules in ways designed to help businesses avoid
liability. While the promulgation of rules and regulations is
subject to public comment and judicial review, legal opinions
and enforcement orders are issued without such safeguards in
place. In this respect, SB 713 thus threatens to create a slew
of 'underground regulations' that courts have consistently found
to be contrary to the Administrative Procedures Act."
Support : Air Conditioning Trade Association; Associated
Builders and Contractors of California; Associated General
Contractors; Brea Chamber of Commerce; California Ambulance
Association; California Apartment Association; California
Assisted Living Association; California Chamber of American
Fence Association; California Delivery Association; California
Fence Contractors' Association; California Farm Bureau
Federation; California Framing Contractors Association;
California Grocers Association; California Hospital Association;
California Independent Oil Marketers Association; California
Landscape Contractors Association; California Lodging Industry
Association; California Manufacturers and Technology
Association; California Metals Coalition; California Retailers
Association; California Trucking Association; California
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Winegrape Growers Association; Camarillo Chamber of Commerce;
Chambers of Commerce Alliance of Ventura & Santa Barbara
Counties; Civil Justice Association of California; Consumer
Specialty Products Association; El Centro Chamber of Commerce;
Engineering Contractor's Association; Flasher Barricade
Association; Fullerton Chamber of Commerce; Garden Grove Chamber
of Commerce; Goleta Valley Chamber of Commerce; Greater Conejo
Valley Chamber of Commerce; Greater Fresno Area Chamber of
Commerce; Greater Riverside Chambers of Commerce; Irwindale
Chamber of Commerce; Long Beach Area Chamber of Commerce; Marin
Builders Association; Messenger Courier Association of America;
National Federation of Independent Business; Official Police
Garages of Los Angeles; Orange Chamber of Commerce; 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; Redondo Beach
Chamber of Commerce; San Gabriel Valley Legislative Coalition of
Chambers; Santa Clara Chamber of Commerce and
Convention-Visitors Bureau; Simi Valley Chamber of Commerce;
South Bay Association of Chambers of Commerce; Southwest
California Legislative Council; Tulare Chamber of Commerce;
Western Electrical Contractors Association; Western Growers
Association
Opposition : California Advocates for Nursing Home Reform;
California Alliance for Retired Americans; California Employment
Lawyers Association; California Labor Federation; California
Rural Legal Assistance Foundation; Center for Environmental
Health; Coalition for Clean Air; Congress of California Seniors;
Consumer Action; Consumer Attorneys of California; Consumer
Federation of California; Consumer Watchdog; Consumers for Auto
Reliability and Safety; Environmental Law Foundation; National
Lawyers Guild Labor & Employment Committee; Sierra Club
California; The Utility Reform Network; United Policyholders
HISTORY
Source : California Chamber of Commerce
Related Pending Legislation : None Known
Prior Legislation :
SB 1374 (Harman & Correa, 2012) See Background.
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SB 883 (Correa, 2011) See Background.
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