BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 970| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 970 Author: Nazarian (D) Amended: 4/15/15 in Assembly Vote: 21 SENATE LABOR & IND. REL. COMMITTEE: 3-1, 6/10/15 AYES: Mendoza, Leno, Mitchell NOES: Stone NO VOTE RECORDED: Jackson SENATE APPROPRIATIONS COMMITTEE: 5-1, 6/22/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NOES: Bates NO VOTE RECORDED: Nielsen ASSEMBLY FLOOR: 48-26, 5/18/15 - See last page for vote SUBJECT: Labor Commissioner: enforcement of employee claims SOURCE: California Rural Legal Assistance Foundation DIGEST: This bill authorizes the Labor Commissioner to issue a citation to enforce local minimum wage and overtime laws, as well as against an employer or person acting on behalf of an employer for violations of existing law related to reimbursements for expenses. ANALYSIS: Existing law: 1)Authorizes the Labor Commissioner to investigate and enforce AB 970 Page 2 statutes and orders of the Industrial Welfare Commission that, among other things, specify the requirements for the payment of wages by employers. 2)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 wages owed, plus interest. (Labor Code §§ 98 & 98.2) 3)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) 4)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) 5)States that the minimum wage for employees fixed by the Industrial Welfare 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) 6)Provides that any employer who pays an employee a wage less than the minimum fixed by the Industrial Welfare 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) 7)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) 8)States that an employer shall indemnify (or compensate) his or her employee for all necessary expenditures or losses incurred AB 970 Page 3 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: 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. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee, the Department of Industrial Relations indicates that it will incur annual ongoing costs of $125,000 (special funds) to implement the provisions of this bill. SUPPORT: (Verified6/10/15) California Rural Legal Assistance Foundation (source) Bet Tzedek Legal Services California Immigrant Policy Center AB 970 Page 4 California Labor Federation, AFL-CIO California Nurses Association Maintenance Cooperation Trust Fund OPPOSITION: (Verified6/10/15) Associated Builders and Contractors of California Association General Contractors California Association for Health Services at Home California Automotive Wholesalers' Association California Bankers Association California Chamber of Commerce 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 ARGUMENTS IN SUPPORT: 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 for tools or equipment necessary to AB 970 Page 5 perform the job, but which are deducted from workers' pay notwithstanding. Proponents note that under existing 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 specifically authorizes 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. ARGUMENTS IN OPPOSITION:A coalition of employer groups, including the California Chamber of Commerce, opposes this bill, 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 Labor Commissioner's jurisdiction will likely result in an AB 970 Page 6 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. ASSEMBLY FLOOR: 48-26, 5/18/15 AYES: Alejo, Bloom, Bonilla, Bonta, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Rendon, Ridley-Thomas, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Gray, Grove, Hadley, Harper, Jones, Lackey, Linder, Maienschein, Mayes, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk NO VOTE RECORDED: Brown, Kim, Mathis, Melendez, Perea, Rodriguez Prepared by:Deanna Ping/ L. & I.R. / (916) 651-1556 6/24/15 17:19:49 AB 970 Page 7 **** END ****