BILL ANALYSIS Ó
AB 621
Page 1
Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
621 (Roger Hernández) - As Introduced February 24, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY: This bill relieves a motor carrier performing drayage
services of liability for statutory or civil penalties
associated with misclassification of commercial drivers as
independent contractors if the motor carrier enters into a
consent decree with the Labor Commissioner prior to January 1,
2017, where the motor carrier agrees to convert all of its
commercial drivers to employees, and the consent decree contains
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prescribed components, including, but not limited to, an
agreement by the motor carrier to pay all wages, benefits, and
taxes owed, if any. This bill would not apply to a motor carrier
that has a pending lawsuit against it if the lawsuit was filed
prior to January 1, 2015.
FISCAL EFFECT: Initial administrative costs of approximately
$900,000 and ongoing costs of approximately $850,000 to the
Department of Industrial Relations (DIR) Division of Labor
Standards Enforcement (DLSE) to review consent decrees. These
costs may be offset to the extent the consent decree process
reduces individual wage claim cases.
COMMENTS:
1)Purpose. This bill enacts a limited amnesty program with
respect to the misclassification of port drivers. According to
the author and the California Teamsters Public Affairs Council
(sponsor), nearly all of the "owner-operator" truck drivers
that haul intermodal freight to and from the ports of
California have been misclassified. They point to hundreds of
recent cases and class action lawsuits where the drivers have
been determined to be employees. A recent court decision in
San Diego, for example, awarded seven drivers a judgment of
over $2 million against their employer for not properly
classifying them as employees. Supporters contend this bill
will allow the parties to come together, rectify the
situation, and move forward in a productive manner.
2)Background. California is home to some of the largest and most
complex port operations in the world. By some estimates,
there are approximately 20,000 port drivers in California,
including 16,000 at the Ports of Los Angeles and Long Beach,
2,500 at the Port of Oakland, and 1,500 at the smaller Ports
of San Diego, San Francisco, and Stockton.
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As the trucking industry was deregulated in the 1980s, the
industry has relied more on independent contractors or "owner
operator" port truck drivers, rather than recognizing drivers
as employees. There has been much debate over whether this
classification of drivers as independent contractors is
lawful. This particular question is not unique to the port
drayage context, as concern about misclassification of workers
as independent contractors affects many other industries.
The determination of whether a worker is an employee or
independent contractor is important for a number of reasons,
including what rights and remedies the worker is afforded
under state and federal law, federal and state tax
consequences for the employer, and the level of tax revenues
for the state and federal government.
In general, independent contractors need not be covered by
workers' compensation, do not have employment taxes deducted
from their earnings, are not covered by many state and federal
anti-discrimination laws, are not included under Cal-OSHA and
federal OSHA in an employer's duty to provide a safe and
healthy work environment, are not covered by state and federal
wage and hour laws, are not entitled to unemployment insurance
benefits from an employer's account, and are excluded from
coverage under the National Labor Relations Act (NLRA).
3)Berman hearings. According to DIR, over the last three years,
the DLSE has held over 500 wage claim hearings (aka Berman
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hearings) for this industry and note the hearings have been
very fact intensive. Generally, Berman hearings take a half
day or one full day to complete. Many of these cases have
taken up to a week. Additionally, DLSE attorneys have
enforced hearing findings in civil court on appeal.
As of January 2015, the Labor Commissioner had issued 113
orders, decisions or awards (ODAs) totaling almost $5 million.
Of these, 46 ODAs had been appealed by the employer
(representing $3.9 million in awards).
4)Opposition. The California Trucking Association (CTA) opposes
this bill as it does not address the key issue leading to
drayage motor carriers facing this situation in the first
place - misuse of the DLSE's administrative hearing process.
CTA states that the administrative (or "Berman hearing")
process was designed to provide a speedy, informal and
affordable method for employers and employees to resolve
simple wage claims. CTA argues that claims of
misclassification of commercial drivers as independent
contractors are some of the most complex claims being
addressed by DLSE, and therefore should not be addressed via
this procedure. Additionally, CTA asserts that it has been
the longstanding policy of multiple Labor Commissioners, prior
to the current administration to defer such complex, high-wage
claims to the court system.
Therefore, CTA recommends two reforms related to the use of
the Berman hearing procedures. First, in order to reduce the
subjectivity involved with these reviews, they suggest that
existing law should be amended to clearly define that these
complex matters are "better addressed and eventually
adjudicated in the courts." Second, CTA recommends that the
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law should be amended to statutorily memorialize the DLSE's
previous policy (which they claim was utilized up until 2008)
that the Labor Commissioner decline the use of the Berman
hearing procedure for all claims of $30,000 or more where
employment status is at issue. They state that average award
against motor carriers is $87,000, but some have reached
beyond $200,000.
CTA concludes that, in "concert with any discussion about
partial relief of liability for penalties associated with wage
claims where a dispute of employment status exists, we should
first examine the mechanism generating this liability."
Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081