BILL ANALYSIS                                                                                                                                                                                                    





          SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               AB 970       Hearing Date:    June 10,  
          2015
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          |Author:    |Nazarian                                             |
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          |Version:   |April 15, 2015                                       |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Deanna Ping                                          |
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            Subject:  Labor Commissioner: enforcement of employee claims.


          KEY ISSUE
          
          Should the Legislature authorize the Labor Commissioner to issue  
          a citation to enforce local minimum wage and overtime laws? 

          Should the Legislature authorize the Labor Commissioner to issue  
          a citation against an employer or person acting on behalf of an  
          employer for violations of existing law related to  
          reimbursements for expenses?
          
          
          ANALYSIS
          
           Existing law  authorizes the Labor Commissioner to investigate  
          and enforce statutes and orders of the Industrial Welfare  
          Commission that, among other things, specify the requirements  
          for the payment of wages by employers. 

           Existing law  provides the Labor Commissioner with the authority  
          to investigate employee complaints and allows the Labor  
          Commissioner to hold a hearing in any action to recover wages,  
          including orders of the Industrial Welfare Commission.  The  
          Labor Commissioner may require an award in the amount of the  








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          wages owed, plus interest. 
          (Labor Code  98 & 98.2)

           Existing law  sets civil penalties for any employer or other  
          person acting on behalf of an employer who violates, or causes  
          to be violated, a section of this chapter or any provision  
          regulating hours and days of work in any order of the Industrial  
          Welfare Commission ranging from $50 upon first violation for  
          each underpaid employee for each pay period to $100 for  
          subsequent violations. (Labor Code 558)

           Existing law  states that if upon inspection or investigation the  
          Labor Commissioner determines that a person had paid or caused  
          to be paid a wage for overtime work in violation of provisions  
          relating to hours and days of work in any order of the  
          Industrial Welfare Commission, the Labor Commissioner may issue  
          a citation. (Labor Code 558)

           Existing law  states that the minimum wage for employees fixed by  
          the commission is the minimum wage to be paid to employees, and  
          the payment of a less wage than the minimum is unlawful. (Labor  
          Code 1197) 
           
          Existing law  provides that any employer who pays an employee a  
          wage less than the minimum fixed by the commission shall be  
          subject to a civil penalty, restitution of wages, liquidated  
          damages payable to the employee, and any applicable penalties.  
          (Labor Code 1197.1) 

           Existing law  states that if upon inspection or investigation the  
          Labor Commissioner determines that a person had paid or caused  
          to be paid a wage less than the minimum wage the Labor  
          Commissioner may issue a citation. (Labor Code 1197.1)

           Existing law  states that an employer shall indemnify (or  
          compensate) his or her employee for all necessary expenditures  
          or losses incurred by the employee in direct consequence of the  
          discharge of his or her duties, or of his or her obedience to  
          the directions of the employer, even though unlawful, unless the  
          employee at the time of obeying the directions believed them to  
          be harmful. (Labor Code 2802) 


           This bill  :  








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          1)Provides that, if upon inspection or investigation the Labor  
            Commissioner determines that a person has violated overtime  
            requirements of existing law, including "any applicable local  
            overtime law," the Labor Commissioner may issue a citation.


          2)Provides that, if upon inspection or investigation, the Labor  
            Commissioner determines that a person has paid less than the  
            minimum wage under applicable state or local law, the Labor  
            Commissioner may issue a citation.


          3)States that the Labor Commissioner shall not issue a citation  
            against an employer for a violation of any applicable local  
            overtime or minimum wage law if the local entity with  
            jurisdiction in the matter has cited or has initiated an  
            investigation against the employer for the same violation. 


          4)Authorizes the Labor Commissioner to issue a citation against  
            an employer or person acting on behalf of an employer for  
            violations of existing law related to reimbursement  
            obligations for expenses.



          COMMENTS
          

          1.  Need for this bill?

           Currently, California workers can file a civil action or may  
          file an administrative complaint with the Labor Commissioner to  
          recover unpaid wages.  As was discussed above, an employee who  
          waged a successful civil action to receive unpaid minimum wage  
          balances would be entitled to recover the full amount of the  
          unpaid balance of wages, including interest, reasonable  
          attorney's fees and costs of suit.  Liquidated damages could  
          then also be awarded. After AB 240 of 2012 was enacted, a worker  
          can also be awarded liquidated damages through the Labor  
          Commissioner hearing process. 

          A worker may also recover owed wages as a result from an  
          inspection from the Division of Labor Standards and  







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          Enforcement's Bureau of Field Enforcement (BOFE). BOFE conducts  
          inspections of industries to ensure compliance with the Labor  
          Code. While BOFE does not pursue individual wage claims, at  
          times the investigation results in an audit of the employer's  
          time and payroll records. If this occurs, the Division will  
          attempt to collect wages for all employees found to have been  
          underpaid. However, the Division cannot collect liquidated  
          damages, requiring the worker to file an administrative  
          complaint with DLSE to collect liquidated damages. 
           
           Labor Code Section 558, 1197, and 1197.1, provide a legal  
          framework for enforcement of state minimum wage and overtime  
          wage requirements. Local municipalities, such as San Francisco,  
          Oakland, Berkeley, and San Jose, have implemented local living  
          wage laws.

          According to the author, current law does not specify that  
          recovery of local minimum wage or overtime wage requirement owed  
          to a worker can be included in the Labor Commissioner/Bureau of  
          Field Enforcement minimum wage citation process and states that  
          higher minimum wage and indemnity charges can only be recovered  
          by a worker either in a civil action or via a Berman hearing.

          The author notes that this bill allows the Labor Commissioner to  
          issue a citation for employer violations of illegal tool or  
          equipment deductions and encourages compliance with higher local  
          living wage laws by giving the Labor Commissioner the discretion  
          to cite when finding violations of those laws. The author argues  
          that AB 970 is intended to eliminate significant gaps in the  
          Labor Commissioner's citation authority and promotes government  
          efficiency in labor law enforcement, strengthens the deterrent  
          effect of its enforcement efforts, and increases the probability  
          of workers recovering unpaid wages. The author also notes that  
          AB 970 ensures that workers have the same monetary relief  
          whether they pursue their claims administratively, by way of the  
          courts or via the Labor Commissioner's existing authority.


          2. Proponent Arguments  :

          According to proponents, existing Labor Code Section 2802  
          requires an employer to indemnify his or her employees for "all  
          necessary expenditures or losses" incurred by the employee in  
          direct consequence of his or her duties.  Proponents note that a  
          very common violation of this provision involves illegal charges  







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          for tools or equipment necessary to perform the job, but which  
          are deducted from workers' pay notwithstanding. Proponents note  
          that under current law, workers may file a civil action to  
          recover these illegal deductions from their pay, or may seek to  
          recover them in a Berman wage claim hearing. However, proponents  
          argue that the Labor Commissioner cannot issue a citation for  
          this violation, even if she determines upon inspection or  
          investigation that the charges are illegal and have not been  
          repaid to the worker -this bill would specifically authorize the  
          Labor Commissioner to issue citations in such situations.

          However, proponents state that as more local California  
          authorities have enacted higher minimum wage laws applicable to  
          the lowest paid workers in their jurisdictions, the Labor  
          Commissioner has been processing claims to enforce these higher  
          wage requirements in Berman wage hearings.  They argue that this  
          bill recognizes this evolution and authorizes the Labor  
          Commissioner to also issue a citation when she determines an  
          employer has violated an applicable local wage law.

          Lastly, proponents contend that this bill is likely to make a  
          significant contribution to encouraging compliance with higher  
          local living wage laws by giving the Labor Commissioner the  
          discretion to cite when she finds violations of these laws.   
          Proponents argue that employers would be subject to the same  
          citation amounts, and have the same appeal rights, as would  
          apply if they were cited for a violation of state minimum wage  
          or overtime requirements.  Proponents note that the Labor  
          Commissioner has been enforcing these local wage requirements in  
          her wage claim hearings; this bill simply extends authority to  
          cite when violations are encountered in the field.

          3.  Opponent Arguments  :

          A coalition of employer groups, including the California Chamber  
          of Commerce, opposes this measure, stating that it will subject  
          employers to layers of penalties and enforcement efforts,  
          increased annual assessments, and a limited opportunity to  
          appeal.

          First, opponents note that beginning in 2009 the costs of state  
          labor law enforcement were primarily transferred from the  
          General Fund to private sector employers through annual  
          assessments on workers' compensation premiums, which are based  
          upon the employers' payroll. Accordingly, any increase in the  







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          Labor Commissioner's jurisdiction will likely result in an  
          increase to all employers' annual assessments. Employers  
          statewide should not have to pay for these increased assessments  
          for the enforcement of local laws where they are not located.



          Lastly, opponents state that under the citation process, an  
          employer challenging a citation can request an administrative  
          hearing to contest the citation and may only challenge the  
          administrative ruling pursuant to a writ of mandate.  A writ of  
          mandate limits the superior court's scope of review of the  
          evidence and arguments the court may consider for purposes of  
          challenging the administrative ruling.  Comparatively, in wage  
          claim adjudication through the Labor Commissioner's office, an  
          employer has a right to a trial de novo to superior court if the  
          employer wants to challenge an administrative ruling, which  
          provides the court with unlimited review of the underlying  
          complaint as well as any new issues, evidence or arguments  
          raised on appeal.  Accordingly, to the extent the Labor  
          Commissioner is resolving any local minimum wage violations  
          through the wage claim process, that process provides a fairer  
          opportunity for an employer to appeal a ruling it believes was  
          issued in error rather than the citation process. 


          4.  Prior Legislation  :

          AB 1723 (Nazarian) of 2014 - authorized the Labor Commissioner  
          to include "waiting time" penalties in wage citations

          AB 442 (Nazarian), Chapter 735, Statutes of 2013 - authorized  
          the Labor Commissioner to collect liquidated damages from an  
          employer who pays an employee less than minimum wage.

          
          SUPPORT
          
          California Rural Legal Assistance Foundation (Sponsor)
          Bet Tzedek Legal Services
          California Immigrant Policy Center
          California Labor Federation, AFL-CIO
          California Nurses Association
          Maintenance Cooperation Trust Fund








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          OPPOSITION
          
          California Chamber of Commerce
          Associated Builders and Contractors of California
          Association General Contractors 
          CAWA - Representing the Automotive Parts Industry
          California Association for Health Services at Home
          California Bankers Association
          California Employment Law Council
          California Grocers Association 
          California Manufacturers and Technology Association
          California New Car Dealership Association
          California Pool & Spa Association
          California Restaurant Association
          California Trucking Association
          Chamber of Commerce Mountain View
          El Centro Chamber of Commerce & Visitors Bureau
          Fullerton Chamber of Commerce
          Greater Conejo Valley Chamber of Commerce
          Greater Fresno Area Chamber of Commerce
          Lake Tahoe South Shore Chamber of Commerce
          National Federation of Independent Business
          Palm Desert Area Chamber of Commerce
          Redondo Beach Chamber of Commerce and Visitors Bureau
          San Jose Silicon Valley Chamber of Commerce
          Santa Clara Chamber of Commerce & Convention-Visitor's Bureau 
          Santa Maria Valley Chamber of Commerce Visitor and Convention  
          Bureau
          Simi Valley Chamber of Commerce
          South Bay Association of Chambers of Commerce
          Western Electrical Contractors Association

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