BILL ANALYSIS Ó AB 795 Page A Date of Hearing: April 22, 2015 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 795 (Low) - As Amended March 26, 2015 SUBJECT: Employment: Department of Industrial Relations: wage claims SUMMARY: Requires the Department of Industrial Relations (DIR) to submit a report to the Legislature the amount of time it takes for wage claims to receive a preliminary hearing date. EXISTING LAW: Authorizes the Labor Commissioner from DIR to investigate and enforce labor laws and orders of the Industrial Welfare Commission (IWC) that, among other things, include wage claims. Also, provides for criminal and civil penalties for violations of statutes and orders of the IWC regarding payment of wages. FISCAL EFFECT: Unknown COMMENTS: According to a 2013 report "Winning Wage Justice" by the National Employment Law Project (NELP) shortchanging workers of the wages they are owed - wage theft - is becoming a defining trend of the 21st century labor market. It takes many forms for workers, including being paid less than the minimum wage or other agreed upon wage, working "off-the-clock" without pay, AB 795 Page B getting less than time-and-a half for overtime hours, having tips stolen, being misclassified as an "independent contractor" instead of an employee and underpaid, having illegal deductions taken out of paychecks, or simply not being paid at all. It spans a number of industries as well. The wage theft crisis in this state is well-documented. A recent UCLA study<1> reported that an estimated $26 million in wages per week are stolen from low-wage workers in Los Angeles County alone. Adding to the crisis are the backlogs clogging the timely processing of wage claim hearings for impacted workers. Wage Claims Adjudication As the largest unit within the Division of Labor Standards Enforcement (DLSE), Wage Claims Adjudication (WCA) handles over 30,000 new wage claims a year in 16 offices across the state. Under Section 98 of the California Labor Code, workers may file a claim before the DLSE for unpaid wages (including minimum wage and overtime), other compensation, and penalties through an administrative claims process. Commonly known as the "Berman" process, this process has been heralded by the Legislature and the courts as an indispensable alternative to costly litigation for both workers and employers. When a Berman --------------------------- <1> Wage Theft and Workplace Violations in Los Angeles: The Failure of Employment and Labor Law for Low-Wage Workers, Milkman, Gonzalez & Narro, Institute for Research on Labor and Employment, UCLA (2010). AB 795 Page C claim is filed, WCA staff typically hold a settlement conference and hearing on the claim. In addition, WCA staff administer wage claims brought by garment workers under a separate statutorily-mandated process (known as "AB 633") for investigating and adjudicating garment claims. From 2009 to 2011 it was taking an average of seven months for a wage claim to be heard. The backlog for AB 633 claims was even worse with more than half of those open cases filed two to three years prior. Prior to 2008, DLSE did not officially track the time it took for a wage claim to be heard. As a result of the LC working to raise the bar on enforcement efforts there has been a small reduction in the length of time for wage claim to be heard. The length of time has been reduced to between five and six months for Berman claims to be heard.<2> Although the DLSE has made progress to reduce the delays for wage claim hearings and AB 633 cases in the last two years, more work needs to be done to further expedite the wage claims hearing process. The author argues that wage theft exacts a heavy socio-economic toll on workers, particularly low-wage workers and their communities. The proliferation of wage theft, particularly in the underground economy, underscores the fact that effective, strong enforcement of labor laws is needed now more than ever --------------------------- <2> Division of Labor Standards Enforcement Report, May 2013 AB 795 Page D before, to give working people a chance in our economy. Abiding businesses who play by the rules suffer the economic consequences when government enforcement of labor laws is lackluster or nonexistent; unscrupulous employers operating illegally are able to gain an unfair competitive advantage and ignite a race to the bottom that lowers even the most basic labor standards. Additionally the author points out, when California workers are not paid their earned wages, they have less money to spend for basic necessities, which means less consumer spending to help spur economic growth. This adversely impacts not only local communities and economies, but also the entire state. The DLSE's enforcement activities not only put hard-earned wages in the pockets of workers, but also help generate tax revenue and substantial monetary penalties for the state. This bill requires DIR to submit a report to the Legislature detailing the length of time it takes for wage claims to receive a hearing date. REGISTERED SUPPORT / OPPOSITION: Support None on file. AB 795 Page E Opposition None on file. Analysis Prepared by:Lorie Alvarez / L. & E. / (916) 319-2091