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:  8/24/15 in Senate
          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.

          Senate Floor Amendments of 8/24/15 specify that the amended  
          provisions and sections of the bill do not change the  
          applicability of local minimum wage or local overtime laws to  
          any entity.









                                                                     AB 970  
                                                                    Page  2


          Senate Floor Amendments of 7/14/15 specify that nothing in the  
          amended sections of the bill address the applicability of local  
          overtime wage laws to a state agency.

          Senate Floor Amendments of 6/29/15 (1) clarify that the Labor  
          Commissioner, pursuant to a request from the local entity, may  
          issue a citation to an employer for the violation of a local  
          overtime or minimum wage ordinance if the local entity has not  
          cited the employer for the violation, and (2) clarify that if  
          the Labor Commissioner issues a citation the local entity shall  
          not cite the employer for the same violation.

          ANALYSIS:
               
          Existing law:

          1)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. 

          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  







                                                                     AB 970  
                                                                    Page  3


            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  
            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)Specifies that where a local entity has the legal authority to  
            issue a citation against an employer for a violation of any  
            applicable local overtime or minimum wage law, the Labor  
            Commissioner, pursuant to a request from the local entity, may  
            issue a citation against an employer for a violation of a  
            local overtime or minimum wage law of the local entity has not  
            cited the employer for the same violation. 

          2)States that if the Labor Commissioner issues a citation for a  
            violation of any applicable local overtime or minimum wage  
            law, the local entity shall not cite the employer for the same  
            violation. 

          3)Authorizes the Labor Commissioner, if it is determined that a  
            person has paid or caused to paid a wage less than the minimum  
            under applicable law, to issue a citation to the person in  
            violation. 

          4)Authorizes the Labor Commissioner to issue a citation against  







                                                                     AB 970  
                                                                    Page  4


            an employer or person acting on behalf of an employer for  
            violations of existing law related to reimbursement  
            obligations for expenses.

          5)Adds that the minimum wage for employees includes any  
            applicable state or local law and that this does not change  
            the applicability of local minimum wage laws to any entity. 

          6)Specifies that nothing in the amended sections of the bill  
            address the applicability of local minimum wage or overtime  
            wage laws to any entity.

          Comments
          
          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 (Bonilla, Chapter 272, Statutes of 2011) 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  
          Enforcement's (DLSE) 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 DLSE will attempt  
          to collect wages for all employees found to have been underpaid.  
          However, the DLSE cannot collect liquidated damages, requiring  
          the worker to file an administrative complaint with DLSE to  
          collect liquidated damages. 

          Labor Code Sections 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.








                                                                     AB 970  
                                                                    Page  5


          According to the author, existing 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/BOFE  
          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.

          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:   (Verified8/26/15)


          California Rural Legal Assistance Foundation (source)
          Bet Tzedek Legal Services
          California Immigrant Policy Center
          California Labor Federation, AFL-CIO
          California Nurses Association
          California Teamsters Public Affairs Council
          Consumer Attorneys of California
          Maintenance Cooperation Trust Fund
          Roots of Change
          The Wage Justice Center








                                                                     AB 970  
                                                                    Page  6



          OPPOSITION:   (Verified8/26/15)


          Associated Builders and Contractors of California
          Association General Contractors 
          California Ambulance Association 
          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  
          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  







                                                                     AB 970  
                                                                    Page  7


          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  
          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.







                                                                     AB 970  
                                                                    Page  8





          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
          8/26/15 17:02:20


                                   ****  END  ****








                                                                     AB 970  
                                                                    Page  9