BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 621|
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THIRD READING
Bill No: AB 621
Author: Roger Hernández (D)
Amended: 8/31/15 in Senate
Vote: 21
SENATE LABOR & IND. REL. COMMITTEE: 4-1, 6/24/15
AYES: Mendoza, Jackson, Leno, Mitchell
NOES: Stone
SENATE JUDICIARY COMMITTEE: 6-0, 7/7/15
AYES: Jackson, Moorlach, Hertzberg, Leno, Monning, Wieckowski
NO VOTE RECORDED: Anderson
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/27/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 47-29, 6/3/15 - See last page for vote
SUBJECT: Drayage truck operators
SOURCE: California Teamsters Public Affairs Council
DIGEST: This bill creates the Motor Carrier Employer Amnesty
program for port drayage companies that voluntarily execute a
settlement agreement with the Labor Commissioner related to
misclassification of employees.
ANALYSIS:
Existing law:
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1)Provides numerous comprehensive requirements, rights, and
remedies relating to the employer-employee relationship,
including, but not limited to, wages and other compensation,
hours, workers' compensation, labor code violation actions,
employment contracts, and standards for working conditions.
Under existing law, the Employment Development Department
(EDD) has the powers and duties necessary to administer the
reporting, collection, refunding to the employer, and
enforcement of taxes required to be withheld by employers.
2)Requires, under the California common law theory of joint
employment, a determination as to whether the entity in
question has the right to direct and control the manner and
means by which the work is performed, known as the "right of
control" test. (S. G. Borello & Sons, Inc. v Dept. of
Industrial Relations (1989) 48 Cal.3d 341. and Martinez v.
Combs (2010) 49 Cal.4th 35)
3)Establishes the following definitions:
a) "Employee" means every person in the service of an
employer under any appointment or contract of hire or
apprenticeship, express or implied, oral or written,
whether lawfully or unlawfully employed, as specified.
(Labor Code §3351) But excludes specified individuals such
as someone who is employed by his or her parent, spouse or
child. (Labor Code §3352)
b) "Independent contractor" means any person who renders
service for a specified recompense for a specified result,
under the control of his principal as to the result of his
work only and not as to the means by which such result is
accomplished. (Labor code §3353)
c) The contract of employment is a contract by which one,
who is called the employer, engages another, who is called
the employee, to do something for the benefit of the
employer or a third person. (Labor Code §2750)
This bill:
1)Establishes the Motor Carrier Employer Amnesty program
(program), to be administered by the Labor Commissioner and
EDD, a limited amnesty program with respect to the
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misclassification of port drivers.
2)Provides that the Labor Commissioner and EDD shall administer
the program to an eligible motor carrier performing drayage
services at any port. The eligible motor carrier shall be
relieved of liability for statutory or civil penalties
associated with misclassification of commercial drivers as
independent contractors if the eligible motor carrier executes
a settlement agreement with the Labor Commissioner whereby the
motor carrier agrees to properly classify all of its
commercial drivers to employees.
3)Adds various definitions including an eligible motor carrier
to mean 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 January 1,
2015, pending against it in a state of federal court that
alleges a misclassification of a commercial driver.
b) A specified penalty assessed by EDD that is final
disposition of that penalty.
4)Provides that a motor carrier shall only apply to participate
in the program by doing all of the following:
a) Submitting an application to the Labor Commissioner,
which at a minimum requires the motor carrier to establish
that it qualifies.
b) Reporting on the results of a self-audit in accordance
with guidelines provided by the Labor Commissioner.
5)Provides that a settlement agreement executed by the Labor
Commissioner and an eligible motor carrier shall require the
eligible motor carrier to:
a) Pay all wages, benefits, and taxes owed, if any, to or
in relation to all of its converted commercial drivers
covering the period of time from the first date of
misclassification to the date the consent decree is entered
into, but not exceeding the applicable statute of
limitations.
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b) Maintain any converted commercial driver positions as
employee positions.
c) Consent that any future commercial drivers hired to
perform the same or similar duties shall be presumed to
have employee status and that the 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.
d) Perform any requirements or provisions the Labor
Commissioner deems necessary to carry out the intent of
this section or to enforce the provisions of the consent
decree.
6)Provides that, before January 1, 2017, the Labor Commissioner
may negotiate and execute a settlement agreement with an
eligible motor carrier but may not on or after January 1,
2017.
7)Provides other specifics for the settlement agreement and
processes and procedures for the Labor Commissioner to pursue
enforcement, including among other provisions:
a) Requires the eligible motor carrier, after the execution
of the settlement agreement, secure worker's compensation
coverage.
b) May require an eligible motor carrier to pay the
reasonable actual costs to the Labor Commissioner and EDD,
as specified.
c) Authorizes a settlement agreement to include provisions
for installment payments.
d) Provides that an eligible motor carrier that executed
and performed its obligations pursuant to a settlement
agreement shall not be liable for specified penalties,
except as provided.
Comments
In February 2014, the National Employment Law Project and others
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issued a report which revisited the issues of port driver
working conditions and reported widespread misclassification of
drivers. Among other findings, the report estimated that 49,000
of the nation's 75,000 port truck drivers are misclassified as
independent contractors.
This report placed a particular emphasis on the costs to workers
and the state and federal governments as a result of
misclassification:
1)The report estimated that port trucking companies in
California are annually liable for wage and hour violations of
between $787 and $998 million.
2)The report estimated that industry's total federal and state
liability for unemployment insurance fund contributions,
workers' compensation premiums, and income tax payments at
approximately $563 million annually.
3)The report estimated that total quantifiable costs of
misclassification nationally (tax losses plus wage and hour
violations) are $1.4 billion annually.
According to the author, this bill represents an important
opportunity to revolutionize and modernize the port drayage
industry to the benefit of drivers, drayage companies, the
ports, and our local communities. The author contends that this
bill represents a common-sense compromise in allowing the
parties to come together, rectify the situation, and move
forward in a productive manner.
Under this bill, port drayage companies will be provided an
opportunity to voluntarily come forward to participate in a
limited amnesty program by entering into a consent decree with
the Labor Commissioner. Under the terms of the consent decree,
the motor carrier must agree to pay all wages and benefits owed
to previously misclassified independent contractors, and all
taxes owed to the state as a result of such misclassification.
In addition, the company must agree to classify any present or
future commercial drivers as employees. In exchange, a motor
carrier that enters into such a consent decree will be relieved
of liability for statutory or civil penalties based on previous
misclassification of drivers.
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According to the author, AB 621 will transform and modernize
port drayage operations by providing a limited opportunity for
amnesty for motor carriers that come forward and correctly
classify their drivers as employees rather than independent
contractors.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, the Department
of Industrial Relations and EDD would likely incur annual costs
in the hundreds of thousands of dollars to implement the
provisions of this bill. To the extent the consent decree
process reduces individual wage claim cases, these costs could
be somewhat offset. This bill could also result in additional
collections to the wage funds (such as disability insurance)
administered by EDD, the extent to which is unknown.
SUPPORT: (Verified8/28/15)
California Teamsters Public Affairs Council (source)
California Labor Federation, AFL-CIO
Shippers Transport Express
Total Transportation Services, Inc.
OPPOSITION: (Verified8/28/15)
California Business Properties Association
California Retailers Association
California Trucking Association
ARGUMENTS IN SUPPORT: Proponents note that numerous studies,
reports, enforcement actions, and court decisions have confirmed
that nearly all the so-called "owner-operator" truck drivers
that haul intermodal freight to and from the ports of California
have been misclassified. Proponents also note that in hundreds
of recent cases and class action lawsuits, the drivers have been
determined to be employees and when a driver has been
misclassified, the employer is liable for back wages, taxes,
social security contributions, and potentially massive
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penalties.
According to proponents, this bill creates a voluntary program
(to be administered by the Labor Commissioner) which will allow
motor carriers who wish to reclassify their drivers as employees
and have the penalties associated with their past unlawful
conduct waived. They argue that this bill is a way for port
drayage motor carriers to be a part of the cleaning up of this
industry and will save them from paying financially crippling
penalties.
ARGUMENTS IN OPPOSITION:Opponents argue that AB 621 fails to
address the greater underlying issues of misclassifying
commercial drivers as independent contractors and should seek to
find a solution within existing enforcement mechanisms.
Opponents assert 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.
Opponents recommend two reforms related to the use of the Berman
hearing procedures. First, they assert that in order to reduce
the subjectivity involved with these reviews, existing law
should be amended to clearly define that these complex matters
are "better addressed and eventually adjudicated in the courts."
Second, opponents recommend that the law should be amended to
statutorily memorialize the Division of Labor Standards
Enforcement'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.
ASSEMBLY FLOOR: 47-29, 6/3/15
AYES: Alejo, Bonilla, Bonta, Brown, Burke, Calderon, Campos,
Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman,
Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gonzalez,
Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer,
Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian,
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O'Donnell, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,
Santiago, Mark Stone, Ting, Weber, Williams, Wood, Atkins
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Dahle, Beth Gaines, Gallagher, Gatto, Grove, Hadley,
Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis,
Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth,
Wagner, Waldron, Wilk
NO VOTE RECORDED: Bloom, Frazier, Perea, Thurmond
Prepared by:Deanna Ping / L. & I.R. / (916) 651-1556
8/30/15 19:42:17
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