Amended in Senate September 4, 2015

Amended in Senate August 31, 2015

Amended in Senate June 25, 2015

Amended in Assembly June 1, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 621

Introduced by Assembly Member Roger Hernández

February 24, 2015

An act to add Section 2750.8 to the Labor Code, and to add Article 8.6 (commencing with Section 1160) to Chapter 4 of Part 1 of Division 1 of the Unemployment Insurance Code, relating to employment.

LEGISLATIVE COUNSEL’S DIGEST

AB 621, as amended, Roger Hernández. Drayage truck operators: Motor Carrier Employer Amnesty Program.

Existing law governs the relationship between an employer and an employee with regard to hiring, promotion, discipline, wages and hours, working conditions, and administrative and judicial remedies. Existing law sets forth guidelines for determining whether a person who performs work for another pursuant to a contract is an employee or an independent contractor. Existing law authorizes the Labor Commissioner to investigate employee complaints and to conduct a hearing in any action to recover wages, penalties, and other demands for compensation.

This bill would establish the Motor Carrier Employer Amnesty Program pursuant to which, notwithstanding any law, a motor carrier performing drayage services may be relieved of liability for statutory or civil penalties associated with misclassification of commercial drivers as independent contractors if the motor carrier enters into a settlement agreement with the Labor Commissioner, with the begin insert cooperation and end insert consent of the Employment Development Department, prior to January 1, 2017, whereby the motor carrier agrees to convert all of its commercial drivers to employees, and the settlement agreement contains prescribed components, including, but not limited to, an agreement by the motor carrier to pay all wages, benefits, and taxes owed, if any. The bill would permit a settlement agreement to contain a provision authorizing the Labor Commissioner and the Employment Development Department to recover from the motor carrier the reasonable, actual costs of the Labor Commissioner and the Employment Development Department for their respective review, approval, and compliance monitoring of that settlement agreement.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 2750.8 is added to the Labor Code, to
read:

2750.8.  

(a) The Labor Commissioner and the Department of
Employment Development shall administer the Motor Carrier
Employer Amnesty Program pursuant to which, notwithstanding
any law, an eligible motor carrier performing drayage services at
any port shall be relieved of liability for statutory or civil penalties
associated with the misclassification of commercial drivers as
independent contractors, as provided by this program, if the eligible
motor carrier executes a settlement agreement with the Labor
Commissioner whereby the eligible motor carrier agrees to, among
other things, properly classify all of its commercial drivers as
employees.

(b) As used in this section, the following terms shall have the
following meanings:

(1) “Commercial driver” means a person who holds a valid
commercial driver’s license who is hired or contracted to provide
port drayage services.

(2) “Department” means the Employment Development
Department.

(3) “Eligible motor carrier” means a motor carrier that shall not
have any of the following on the date it applies to participate in
the program:

(A) A civil lawsuit that was filed on or before begin delete January 1, end delete
begin insert December 31, end insert 2015, pending against it in a state or federal court
that alleges begin insert or involves end insert a misclassification of a commercial driver.

(B) A penalty assessed by the department pursuant to Section
1128 that is final imposition of that penalty.

(4) “Motor carrier” means a registered owner, lessee, licensee,
or bailee of a commercial motor vehicle, as set forth in subdivision
(b) of Section 15210 of the Vehicle Code, that operates or directs
the operation of a commercial motor vehicle on a for-hire or
not-for-hire basis to perform port drayage services.

(5) “Port” means any sea or river port located in this state.

(6) “Program” means the Motor Carrier Employer Amnesty
Program established by this section and as provided by Article 8.6
(commencing with Section 1160) of Chapter 4 of Part 1 of Division
1 of the Unemployment Insurance Code.

(c) (1) A motor carrier shall only apply to participate in the
program by doing all of the following:

(A) Submit an application to the Labor Commissioner, on a
form provided by the Labor Commissioner. The application shall,
at a minimum, require the motor carrier to establish it qualifies as
an eligible motor carrier.

(B) Report on the results of a self-audit in accordance with the
guidelines provided by the Labor Commissioner.

begin insert

(2) A motor carrier that voluntarily or as a result of a final
disposition in a civil proceeding reclassified its commercial drivers
as employees on or before January 1, 2016, shall, in addition to
other information requested by the Labor Commissioner, also
submit with its application all of the following:

end insert begin insert

(A) Documentation demonstrating that the motor carrier
reclassified its commercial drivers as employees, including the
commencement period applicable to the reclassification.

end insert begin insert

(B) The identification of each commercial driver reclassified
in the documents provided in subparagraph (A), the amounts paid
to each commercial driver to compensate for the previous
misclassification, and the time period applicable to the amount
paid to each commercial driver prior to reclassification.

end insert begin insert

(C) A report of a self-audit for all commercial drivers
reclassified by the motor carrier identified in subparagraphs (A)
and (B), and also include a separate self-audit report for any
commercial driver who is subject to reclassification, but is not
identified in subparagraph (B).

end insert begin delete

(2)

end delete

begin insert (3) end insert  A proceeding or action against a motor carrier pursuant to
Sections 2698 to 2699.5, inclusive, shall not be initiated after the
motor carrier has submitted an application for participation in the
program, but may be initiated if the motor carrier’s application is
denied.

begin delete

(3)

end delete

begin insert (4) end insert  If a motor carrier’s application to participate the program is
denied by the Labor Commissioner, the application or its
submission shall not be considered an acknowledgment or
admission by the motor carrier that it misclassified its commercial
drivers as independent contractors, and the application or its
submission shall not be construed in any way to support an
evidentiary inference that the motor carrier failed to properly
classify its commercial drivers as employees.

begin insert

(d) The Labor Commissioner shall analyze the information
provided pursuant to paragraph (2) of subdivision (c) for the
purpose of evaluating the scope of a prior reclassification of an
eligible motor carrier’s commercial drivers to employees and has
discretionary authority to determine whether the scope was
sufficient to afford relief to the misclassified commercial drivers.

end insert begin delete

(d)

end delete

begin insert ( end insert begin insert e) end insert  Before January 1, 2017, the Labor Commissioner, begin delete in
cooperation and end delete with the begin insert cooperation and end insert consent of the
department, may negotiate and execute a settlement agreement
with an eligible motor carrier pursuant to the program that applied
to participate in the program. The Labor Commissioner shall not
execute a settlement agreement on or after January 1, 2017.

begin delete

(e)

end delete

begin insert (f) end insert  Prior to the Labor Commissioner executing a settlement
agreement, an eligible motor carrier shall file its contribution
returns and report unreported wages and taxes for the time period
it seeks relief under the settlement agreement.

begin delete

(f)

end delete

begin insert (g) end insert  A settlement agreement executed by the Labor Commissioner
and an eligible motor carrier pursuant to the program shall require
an eligible motor carrier to do all of the following:

(1) Pay all wages, benefits, and taxes owed, if any, to or in
relation to all of its commercial drivers reclassified from
independent contractors to employees for the period of time from
the first date of misclassification to the date the settlement
agreement is executed, but not exceeding the applicable statute of
limitations.

(2) Maintain any converted commercial driver positions as
employee positions.

(3) Consent that any future commercial drivers hired to perform
the same or similar duties as those employees converted pursuant
to the settlement agreement shall be presumed to have employee
status and that the eligible motor carrier shall have the burden to
prove by clear and convincing evidence that they are not employees
in any administrative or judicial proceeding in which their
employment status is an issue.

(4) Immediately after the execution of the settlement agreement,
secure the workers’ compensation coverage that is legally required
for the commercial drivers who were reclassified as employees,
effective on or before the date the settlement agreement is executed.

(5) Provide the Labor Commissioner and the department with
proof of workers’ compensation insurance coverage in compliance
with paragraph (4) within five days of securing the coverage.

(6) Pay the costs authorized by subdivision begin delete (g), end delete begin insert (h), end insert if required.

(7) Perform any other requirements or provisions the Labor
Commissioner and the department deem necessary to carry out
the intent of this section, the program, or to enforce the settlement
agreement.

begin delete

(g)

end delete

begin insert (h) end insert  A settlement agreement may require an eligible motor carrier
to pay the reasonable, actual costs of the Labor Commissioner and
the department for their respective review, approval, and
compliance monitoring of the settlement agreement. The costs
shall be deposited into the Labor Enforcement and Compliance
Fund. The portion of the costs attributable to the department shall
be transferred to the department upon appropriation by the
Legislature.

begin delete

(h)

end delete

begin insert (i) end insert  The settlement agreement may include provisions for an
eligible motor carrier to make installment payments of amounts
due pursuant to paragraphs (1) and (6) of subdivision begin delete (f) end delete begin insert (g) end insert in lieu
of a full payment. An installment payment agreement shall be
included within the settlement agreement and charge interest on
the outstanding amounts due at the rate prescribed in Sections 1113
and 1129 of the Unemployment Insurance Code. Interest on
amounts due shall be charged from the day after the date the
settlement agreement is executed. The settlement agreement shall
contain a provision that if a motor carrier fails, without good cause,
to fully comply with terms of the settlement agreement authorizing
installment payments, the settlement agreement shall be null and
void and the total amount of tax, interest, and penalties for the time
period covered by the settlement agreement shall be immediately
due and payable.

begin delete

(i)

end delete

begin insert (j) end insert  The Labor Commissioner and the department may share any
information necessary to carry out the program. Sharing
information pursuant to this subdivision shall not constitute a
waiver of any applicable confidentiality requirements and the party
receiving the information shall be subject to any existing
confidentiality requirements for that information.

begin delete

(j)

end delete

begin insert (k) end insert  (1) Notwithstanding any other law and pursuant to the
program, an eligible motor carrier that executed and performed its
obligations pursuant to a settlement agreement shall not be liable,
and the Labor Commissioner or the department shall not enforce,
any civil or statutory penalties, including, but not limited to,
remedies available under subdivision (e) of Section 226, that might
have become due and payable for the time period covered by the
settlement agreement, except for the following penalties:

(A) A penalty charged under Section 1128 of the Unemployment
Insurance Code that is final on the date of the settlement agreement
is executed, unless the penalty is reversed by the California
Unemployment Insurance Appeals Board.

(B) A penalty for an amount an eligible motor carrier admitted
was based on fraud or made with the intent to evade the reporting
requirements set forth in this division or authorized regulations.

(C) A penalty based on a violation of this division or Division
6 (commencing with Section 13000) and either of the following:

(i) The eligible motor carrier was on notice of a criminal
investigation due to a complaint having been filed or by written
notice having been mailed to the eligible motor carrier informing
the motor carrier that it is under criminal investigation.

(ii) A criminal court proceeding has already been initiated
against the eligible motor carrier.

(2) (A) Notwithstanding any other law and pursuant to the
program, an eligible motor carrier that executed and performed its
obligations pursuant to a settlement agreement shall not be liable,
and the Labor Commissioner or the department shall not enforce,
any unpaid penalties, and interest owed on unpaid penalties, on or
before the date the settlement agreement was executed, pursuant
to Sections 1112.5, 1126, and 1127 of the Unemployment Insurance
Code for the tax reporting periods for which the settlement
agreement is applicable, that are owed as a result of the
nonpayment of tax liabilities due to the misclassification of one
or more commercial drivers as independent contractors and the
reclassification of these commercial drivers as employees, except
that penalties, and interest owed on penalties, established as a result
of an assessment issued by the department before the date the
settlement agreement was executed shall not be waived pursuant
to the program.

(B) For purposes of paragraph (1), state personal income taxes
required to be withheld by Section 13020 of the Unemployment
Insurance Code and owed by the motor carrier pursuant to Section
13070 of the Unemployment Insurance Code shall not be collected,
if the eligible motor carrier issued an information return pursuant
to Section 6041A of the Internal Revenue Code reporting payment
or if the commercial driver certifies that the state personal tax has
been paid or that he or she has reported to the Franchise Tax Board
the payment against which the state personal income tax would
have been imposed.

(3) A refund or credit for any penalty or interest paid prior to
the date an eligible motor carrier applied to participate in the
program shall not be granted.

(4) Except for violations described in Section 2119 of the
Unemployment Insurance Code, the department shall not bring a
criminal action for failing to report tax liabilities against an eligible
motor carrier that executed and performed its obligations pursuant
to a settlement agreement for the tax reporting periods subject to
the settlement agreement.

begin delete

(k)

end delete

begin insert ( end insert begin insert l) end insert  The statute of limitations on any claim or liability that might
have been asserted against a motor carrier based on the motor
carrier having misclassified a commercial driver as an independent
contractor shall be tolled from the date a motor carrier applies for
participation in the program through the date the Labor
Commissioner either denies the motor carrier participation in the
program or the motor carrier, as an eligible motor carrier, has failed
to perform an obligation under the settlement agreement, whichever
is later.

begin delete

(l)

end delete

begin insert ( end insert begin insert m) end insert  The recovery obtained by the Labor Commissioner on behalf
of a reclassified commercial driver pursuant to a settlement
agreement shall be tendered to the commercial driver on the
condition that the commercial driver shall execute a release of all
claims the commercial driver may have against the eligible motor
carrier based on the eligible motor carrier’s failure to classify the
commercial driver as an employee. A commercial driver shall not
be under any obligation to accept the terms of a settlement
agreement. If a commercial driver declines to accept the terms of
a settlement agreement, the commercial driver shall not be bound
by the settlement agreement, except that the eligible motor carrier
shall still reclassify the commercial driver as an employee and that
commercial driver shall be precluded from pursing a claim for
civil penalties or statutory penalties covered by the period of time
covered by the settlement agreement. If a commercial driver does
not accept the terms of a settlement agreement, the motor carrier
shall be excused from performing its requirement under the
settlement agreement to pay the amount acknowledged in the
settlement agreement to be due to that commercial driver.

begin delete

(m)

end delete

begin insert (n) end insert  (1) If the Labor Commissioner determines an eligible motor
carrier violated or failed to perform any of its obligations under a
settlement agreement, the Labor Commissioner may file a civil
action to enforce the settlement agreement.

(2) (A) If the Labor Commissioner files a civil action seeking
only recovery of the amounts due to commercial drivers under the
settlement agreement, the Labor Commissioner may obtain judicial
enforcement by filing a petition for entry of judgment for the
liabilities due and remaining pursuant to the settlement agreement.

(B) After filing a petition pursuant to subparagraph (A), the
Labor Commissioner may file an application for an order to show
cause and serve it on the eligible motor carrier. Within 60 days of
the date the Labor Commissioner filed the order to show cause,
the court shall hold a hearing and enter a judgment. The judgment
shall be in amounts which are due and owing to commercial drivers
pursuant to the settlement agreement with credits, if any, for
applicable payments the eligible motor carrier made under the
settlement agreement. A judgment entered pursuant to this
paragraph shall not preclude subsequent action to recover civil
penalties or statutory penalties by the Labor Commissioner, or by
an employee pursuant to Section 2698 to 2699.5, inclusive.

(3) If the court determines in any action filed by the Labor
Commissioner that a motor carrier has violated or otherwise failed
to perform any of its obligations under a settlement agreement,
the court shall award the Labor Commissioner costs and reasonable
attorney’s fees.

SEC. 2.  

Article 8.6 (commencing with Section 1160) is added
to Chapter 4 of Part 1 of Division 1 of the Unemployment
Insurance Code, to read:

 

Article 8.6.  Motor Carrier Employer Amnesty Program

 

1160.  

(a) The department shall collaborate with the Labor
Commissioner to administer the Motor Carrier Employer Amnesty
Program established by Section 2750.8 of the Labor Code and as
provided by this article.

(b) The definitions set forth in Section 2750.8 of the Labor Code
shall apply to this article.

1162.  

Commercial drivers who are classified as employees
pursuant to a settlement agreement shall be eligible to receive a
refund of elective coverage contributions pursuant to Section 708
and may submit a claim for refund pursuant to Section 1178.

1164.  

The department may promulgate regulations and take
any other actions necessary or appropriate to implement this article
and further its participation in the program.