BILL ANALYSIS Ó
AB 588
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
AB 588
(Grove) - As Introduced February 24, 2015
SUBJECT: Labor Code Private Attorneys General Act of 2004
SUMMARY: Amends the Labor Code Private Attorneys General Act of
2004 (PAGA) to allow an employer to cure an alleged violation of
law related to itemized wage statements before a civil action
may be brought by an aggrieved employee and seeks to delete
obsolete cross-references.
FISCAL EFFECT: Unknown
COMMENTS:
The Labor Code Private Attorneys General Act of 2004 (PAGA)
The Labor Code Private Attorneys General Act (PAGA) was enacted
pursuant to SB 796 (Dunn), Chapter # 906, Statutes of 2003, and
went into effect on January 1, 2004.
The Legislative findings accompanying the enactment of SB 796
stated the following:
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"Adequate financing of essential labor law enforcement
functions is necessary to achieve maximum compliance with
state labor laws in the underground economy and to ensure
an effective disincentive for employers to engage in
unlawful and anticompetitive business practices.
Although innovative labor law education programs and
self-policing efforts by industry watchdog groups may have
some success in educating some employers about their
obligations under state labor laws, in other cases the only
meaningful deterrent to unlawful conduct is the vigorous
assessment and collection of civil penalties as provided in
the Labor Code.
Staffing levels for state labor law enforcement agencies
have, in general, declined over the last decade and are
likely to fail to keep up with the growth of the labor
market in the future.
It is therefore in the public interest to provide that
civil penalties for violations of the Labor Code may also
be assessed and collected by aggrieved employees acting as
private attorneys general, while also ensuring that state
labor law enforcement agencies' enforcement actions have
primacy over any private enforcement efforts undertaken
pursuant to this act."
The co-sponsors of SB 796, the California Labor Federation,
AFL-CIO and the California Rural Legal Assistance Foundation,
argued that the bill would address inadequacies in labor law
enforcement in two major ways. First, the bill assigned civil
fine amounts to the large number of Labor Code provisions, which
previously carried prohibitions or criminal fines, but not civil
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penalties. Second, it authorized the filing of civil actions to
recover existing and new civil penalties by aggrieved workers
acting as private attorneys general.
The PAGA was significantly amended by SB 1809 (Dunn), Chapter #
221, Statutes of 2004.
SB 1809 significantly amended the provisions of the PAGA by
enacting specified procedural and administrative requirements
that must be met prior to bringing a private action to recover
civil penalties. Moreover, SB 1809 provided that no action
shall be brought for a posting, notice, agency reporting, or
filing requirement, except as specified.
The provisions of SB 1809 also expanded judicial review of PAGA
claims by requiring courts to review and approve any penalties
sought as part of a proposed settlement agreement, and those
portions of settlements concerning violations of health and
safety laws. In addition, courts were authorized to award a
lesser amount if to do so otherwise would result in an award
that is unjust, arbitrary and oppressive, or confiscatory.
Finally, SB 1809 appropriated $150,000 from the General Fund to
the Labor and Workforce Development Agency (LWDA) for the
purposes of implementing its provisions, and changed the prior
penalty formula to provide that 75 percent of most civil
penalties recovered pursuant to PAGA shall go to the LWDA for
labor law enforcement and education.
Existing Procedural Requirements Under PAGA
As discussed above, SB 1809 significantly amended the provisions
of the PAGA by enacting specified procedural and administrative
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requirements that must be met prior to bringing a private action
to recover civil penalties. SB 1809 essentially enacted three
different procedural requirements depending on the type of
violation.
"Serious" Labor Code Violations
SB 1809 established a new procedure that an aggrieved employee
must follow prior to bringing a civil action to recover
penalties for enumerated, serious Labor Code violations
(including, but not limited to, violations of wage and hour,
overtime, child labor, agricultural, entertainment and garment
industry labor laws, and public works laws).
First, the aggrieved employee must provide written notice of the
violation to the LWDA and to the employer. The LWDA has 30 days
to decide if it will investigate the violation. If the LWDA
decides to investigate the alleged violation, it must notify the
employer and the aggrieved employee within 33 days. Within 120
days of that decision, the Labor Agency may investigate the
alleged violation and issue any appropriate citation. If the
LWDA fails to act, the aggrieved employee may pursue a civil
action under PAGA.
Notice and Cure Provisions for Other Labor Code
Violations
SB 1809 also established specified "notice and cure" provisions
for those Labor Code violations not enumerated as "serious"
above, nor subject to the Cal-OSHA provisions specified below.
For these violations, the following procedural requirements
apply:
First, the aggrieved employee must give written notice to the
LWDA and the employer of the alleged violation. The employer
may cure the alleged violation within 33 days and give written
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notice to the employee and the LWDA if the alleged violation is
cured.
If the alleged violation is cured, no civil action pursuant to
PAGA may commence.
If the alleged violation is not cured within the 33-day period,
the aggrieved employee may commence a civil action pursuant to
PAGA. For the aggrieved employee to dispute that the alleged
violation has been cured, the employee must provide written
notice to the employer and the LWDA. Within 17 days the LWDA
must review the actions of the employer and provide written
notice of whether the alleged violation has been cured.
If the LWDA determines that the alleged violation has not been
cured or if the agency fails to provide timely or any
notification, the aggrieved employee may proceed with a civil
action pursuant to PAGA. If the agency has determined that the
alleged violation has been cured, but the employee still
disagrees, the employee may appeal that determination to the
superior court.
No employer may avail himself or herself of the "notice and
cure" provisions more than three times in a 12-month period for
the same violation or violations contained in the notice,
regardless of the location of the worksite.
Health and Safety (Cal-OSHA) Violations
Finally, SB 1809 established a new procedure that an aggrieved
employee must follow prior to initiating a civil action to
recover penalties for violations of Labor Code provisions
pertaining to occupational safety and health (Cal-OSHA), other
than sections that are specifically enumerated as serious
violations.
First, the aggrieved employee must give written notice to the
Division of Occupational Safety and Health (DOSH) within the
Department of Industrial Relations (DIR) and the employer of the
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alleged violation. DOSH must inspect or investigate the alleged
violation pursuant to existing provisions of law. If DOSH
issues a citation, no civil action pursuant to PAGA may
commence. If, by the end of the period for inspection or
investigation, DOSH fails to issue a citation and the employee
disputes that decision, the employee may challenge the decision
in the superior court. If the court finds that DOSH should have
issued a citation and orders DOSH to issue a citation, then no
civil action pursuant to PAGA may commence. If DOSH fails to
inspect or investigate the alleged violation within the period
specified in existing law, the "notice and cure" provisions
outlined above apply to the determination of the alleged
violation.
SB 1809 also required superior court review of any proposed
settlement of alleged safety in employment violations to ensure
that they are at least as effective as the protections or
remedies provided in federal and state law.
Existing Labor Code 226 - Itemized Wage Statements
Labor Code Section 226 requires every employer, semimonthly or
at the time of each payment of wages, to provide each employee
with an accurate itemized statement, in writing, that contains
the following information: (1) gross wages earned, (2) total
hours worked by the employee (except salaried and exempt
employees), (3) piece rate unite earned and the applicable piece
rate (if the employee is paid on a piece rate basis), (4) all
deductions, (5) net wages earned, (6) inclusive dates of the pay
period, (7) the name of the employee and the last four digits of
his or her social security number or employee identification
number, (8) the name and address of the legal entity that is the
employer and, if the employer is a farm labor contractor, the
name and address of the legal entity that secured the services
of the employer, and (9) all applicable hourly rates in effect
during the pay period and the corresponding number of hours the
employee worked at each hourly rate.
Labor Code Section 226(e) provides that an employee "suffering
injury" as a result of a knowing and intentional failure by an
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employer to comply with the itemized statement requirements is
entitled to recover the greater of all actual damages or $50 for
the initial pay period in which a violation occurs and $100 per
employee for each violation in a subsequent pay period, not
exceeding an aggregate penalty of $4,000.
Recent Concerns Over "Suffering Injury" and SB 1255 (Wright)
from 2012
As discussed above, existing law requires an employer to provide
workers with an accurate itemized wage statement that lists
specified information. Existing law also provides that an
employee that "suffers injury" as a result of an employer's
failure to comply with these requirements is entitled to recover
statutory damages. In recent years, courts have grappled with
defining what "suffering injury" means for purposes of these
provisions - different courts have taken vastly different views
as to the meaning of this term.
Therefore, in 2012 the California Rural Legal Assistance
Foundation (CRLAF) sponsored SB 1255 (Wright) in an attempt to
legislate a compromise by clearly delineating which types of
"true" violations will constitute "suffering injury." As part
of the legislative history of SB 1255, CRLAF submitted an
analysis of over 300 published and unpublished decisions that
they contended split about evenly between an interpretation
favorable to employees and one favorable to employers. In some
cases, courts required employees to show that they did not
receive pay owed to them in order to prove that they suffered
injury. In other cases, courts held that failure to receive an
itemized statement at all or failure to receive specified or
accurate information on the statement which results in confusion
for the employee was sufficient to establish "suffering injury."
Therefore, SB 1255 sought to provide clarity by establishing a
statutory definition of what constitutes "suffering injury" for
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purposes of recovering damages in a lawsuit alleging a violation
of Labor Code section 226 pursuant to subdivision (e). CRLAF
argued that this would benefit both workers (by protecting their
fundamental right to receive accurate information) and employers
(by shielding them from liability over "minor" or
"insignificant" inaccuracies on the wage statements).
SB 1255 was signed by Governor Brown and went into effect on
January 1, 2013.
Changes Proposed by This Bill Related to PAGA Claims for Labor
Code 226 Claims
Under current law, alleged violations of Labor Code Section 226
are enumerated as "serious" violations under the first
procedural mechanism under PAGA. Therefore, an aggrieved
employee must first provide written notice of the violation to
the LWDA and to the employer. If the LWDA fails to act, the
aggrieved employee may pursue a civil action under PAGA for the
alleged Labor Code 226 violation.
This bill proposes to delete Labor Code Section 226 from the
list of enumerated "serious" violations described above.
Therefore, claims for violation of Labor Code 226 would fall
under the "notice and cure" provisions of PAGA.
Therefore, an employer would be allowed to cure the alleged
violation within 33 days of written notice from the employee.
If the alleged violation is cured, no civil action pursuant to
PAGA may commence. If the alleged violation is not cured within
the 33-day period, the aggrieved employee may commence a civil
action pursuant to PAGA.
Changes Proposed by This Bill Related to PAGA Claims for
Advanced-Fee Talent Representation Service
The enumerated list of "serious" violations under PAGA also
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includes now-obsolete references to provisions of law related to
fee-related talent services. AB 1319 (Krekorian) of 2009
repealed those provisions of law and re-enacted (and revised)
them in a different portion of the Labor Code, so the prior
cross-references are now obsolete. This bill seeks to delete
those obsolete cross-references. However, AB 1319 re-enacted
those provisions starting at Labor Code Section 1702.
Therefore, a better approach would be to substitute the current
statutory cross-references in the list of "serious" violations
under PAGA.
Arguments in Support
A broad coalition of supporters argue this bill deletes Labor
Code Section 226 from Section 2699.5 that allows an employee the
immediate right to sue under PAGA, and instead require the
employee to allow the employer 33 days to cure the alleged
violation before a civil action is filed. Labor Code Section
226 is one area in which employers have seen an increase in
frivolous litigation regarding technical violations that do not
harm or injure the employee. An example of this frivolous
litigation is set forth in Elliot v. Spherion Pacific Work, LLC,
572 F.Supp.2d 1169 (2008), in which an employee alleged a cause
of action under Labor Code Section 226 because the employer used
a truncated name on the wage statement. Specifically, the
employer's name on the wage statement was "Spherion Pacific
Work, LLC," instead of Spherion's legal name, "Spherion Pacific
Workforce, LLC." The employee did not allege that this truncated
version of the employer's name misled her, confused her, or
caused her any injury. Although the court ultimately dismissed
this cause of action through summary judgment, the employer
incurred unnecessary legal costs and attorney's fees to have the
cause of action dismissed.
Finally they argue this bill would help curb this type of
frivolous litigation under PAGA with regard to Labor Code
Section 226 by allowing an employer 33 days to cure any alleged
violation. If the employer cannot cure the violation, then the
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employee would still be able file a civil action and obtain any
unpaid wages, penalties and attorney's fees. This reform would
provide the appropriate balance of allowing an employer to
correct unintentional errors, while still protecting the
employee's ability to obtain information regarding how his/her
wages were calculated during the pay period.
Arguments in Opposition
The California Employment Lawyers Association argues against
this bill stating "this bill would create a dangerous precedent
by relegating an important Labor Code workplace protection to a
status of lesser importance and reduced enforceability. By
removing Labor Code Section 226 from the list of provisions for
which PAGA penalties are meaningfully enforceable, the bill
effectively characterizes the requirements of LC Section 226(a)
as "trivial"- indeed, it singles out LaborCode § 226 as the wage
and hour provision of the Labor Code for which employers may
insulate themselves from liability for penalties under PAGA.
Yet, ironically, § 226 contains some of the most basic
employment obligations of employers in this State, as well as
some of the plainest and most straightforward requirements in
the Labor Code. The harm done by an employer that fails to
issue accurate and complete wage statements cannot be
overstated. Not only do employees rely on the contents of their
wage statements to ensure that they are being paid all wages
they have earned for all hours they have worked, but those
statements are critically important in DLSE enforcement actions
as well. Without accurate and complete employee wage statements,
the burden on enforcement agencies and the courts will escalate
substantially. That, in turn, will degrade enforcement and
increase the State's enforcement costs. The information required
to prepare wage statements correctly is entirely within the
employer's control; the information is important to employees
and the burden of full compliance is not onerous; and the
creation of accurate pay records is essential to any
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retrospective review conducted by any court, employee, employer,
or government enforcement authority or taxing agency."
Additionally, they contend, "the fact that the Legislature has
long understood the importance of this information for employees
is emphasized by the fact that one remedy for a violation of
this section is the imposition of actual damages and/or
statutory penalties. The insinuation that this is a "victimless"
violation does not withstand scrutiny. As California's Court of
Appeal explained: Additionally, this lawsuit, and the difficulty
and expense Plaintiffs have encountered in attempting to
reconstruct time and pay records, is further evidence of the
injury suffered as a result of [the employer's] wage statements.
Plaintiffs' ability to calculate unpaid and miscalculated
overtime is complicated by the missing information required by
Section 226(a). The purpose of the requirement is that employees
need not engage in the discovery and mathematical computations
to analyze the very information that California law
requires.(citation omitted.) Jaimez v. DAIOHS USA, Inc. (2010)
181 Cal.App.4th 1286, 1306."
REGISTERED SUPPORT / OPPOSITION:
Support
Acclamation Insurance Management Services
African-American Farmers of California
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Air Conditioning Trade Association
Allied Managed Care
Associated Builders and Contractors - San Diego Chapter
Associated Builders and Contractors of California
California Apartment Association
California Association of Bed and Breakfast Inns
California Bankers Association
California Business Properties Association
California Chamber of Commerce
California Citizens Against Lawsuit Abuse
California Cotton Ginners Association
California Cotton Growers Association
California Farm Bureau Federation
California Fence Contractors
California Fresh Fruit Association
California Hotel and Lodging Association
California League of Food Processors
California Lodging Industry Association
California Manufacturers and Technology Association
California Newspaper Publishers Association
California Pool and Spa Association
California Restaurant Association
California Retailers Association
California Trucking Association
CALPI, Inc.
Cerritos Regional Chamber of Commerce
Civil Justice Association of California
Culver City Chamber of Commerce
Far West Equipment Dealers Association
Flasher Barricade Association
Fullerton Chamber of Commerce
Gateway Chambers Alliance
Greater Fresno Area Chamber of Commerce
National Federation of Independent Business
National Hmong American Farmers
Nisei Farmers League
Orange County Business Council
Paramount Farming Company
Plumbing-Heating-Cooling Contractors Association of California
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Rancho Cordova Chamber of Commerce
Redondo Beach Chamber of Commerce and Visitors Bureau
San Jose Silicon Valley Chamber of Commerce
Santa Maria Valley Chamber of Commerce Visitor & Convention
Bureau
Simi Valley Chamber of Commerce
South Bay Association of Chambers of Commerce
Southwest California Legislative Council
Western Agricultural Processors Association
Western Electrical Contractors Association
Western Growers Association
Western Plant Health Association
Opposition
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
California Labor Federation, AFL-CIO
California Rural Legal Assistance Foundation
California Teamsters Public Affairs Council
Consumer Attorneys of California
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Engineers & Scientists of California
International Longshore & Warehouse Union
Professional & Technical Engineers
UNITE-HERE
Utility Workers Union of America
Analysis Prepared by:Lorie Alvarez / Benjamin Ebbink / L. & E. /
(916) 319-2091