BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: AB 1506 Hearing Date: June 24,
2015
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|Author: |Roger Hernández |
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|Version: |June 15, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Alma Perez-Schwab |
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Subject: Labor Code Private Attorneys General Act of 2004.
KEY ISSUES
Should the Legislature provide an employer with the right to
"cure" the minor violations of (1) not including the dates of
the pay period on an employee's wage statement or (2) not
including the correct legal name and address of the employer
before an aggrieved employee can bring a civil action under the
Private Attorneys' General Act?
ANALYSIS
Existing law requires every employer, semimonthly or at the time
of each payment of wages, to provide each employee with an
accurate itemized statement, in writing, that contains the
following information (Labor Code §226):
1) Gross wages earned;
2) Total hours worked by the employee (except salaried
exempt employees);
3) Piece rate units earned and the applicable piece
rate, if paid on a piece rate basis;
4) All deductions;
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5) Net wages earned;
6) Inclusive dates of the pay period;
7) Name of the employee and the last four digits of
his/her social security number or employee identification
number;
8) Name and address of the legal entity that is the
employer and, if the employer is a farm labor contractor,
the name and address of the legal entity that secured the
services of the employer; and
9) All applicable hourly rates during the pay period
and the corresponding number of hours the employee worked
at each hourly rate.
Under existing law , an employee suffering injury as a result of
a knowing and intentional failure by an employer to comply with
the itemized statement requirements is entitled to recover the
greater of all actual damages or $50 for the initial pay period
in which a violation occurs and $100 per employee for each
violation in a subsequent pay period, not exceeding an aggregate
penalty of $4,000, and is entitled to an award of costs and
reasonable attorney's fees.
Under existing law , an employee is deemed to suffer injury if
the employer fails to:
1. Provide a wage statement.
2. Provide accurate and complete information as required in
items (1) to (9) above and the employee cannot promptly and
easily determine from the wage statement alone one or more
of the following:
a. Amount of gross wages or net wages paid or any
of the other information
required to be provided on the itemized wage
statement.
b. Which deductions the employer made to
determine net wages paid.
c. The name and address of the employer, and if
the employer is a farm labor contractor, the name and
address of the legal entity that secured the services.
d. Name of the employee and last four digits of
his/ her SSN or employee ID number.
Under the existing Private Attorneys General Act of 2004 (PAGA) ,
any provision of the Labor Code that provides for a civil
penalty to be assessed and collected by the Labor and Workforce
Development Agency or any of its departments, divisions,
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commissions, boards, agencies, or employees, for a violation of
this code, may, as an alternative, be recovered through a civil
action brought by an aggrieved employee on his/her behalf or
that of other current and former employees. Among other things,
PAGA authorizes (Labor Code §2698-2699.3):
1. For all provisions of this code, except those for which
a civil penalty is specifically provided, a civil penalty
for a violation of these provisions, as specified.
2. An aggrieved employee who prevails in a civil action may
recover the civil penalties awarded and shall be entitled
to an award of reasonable attorney's fees and costs.
3. Employers to "cure" the alleged violation within a
specified timeframe. The employer must give written notice
to the employee (or representative) and the agency of the
action taken to cure the violation and no civil action may
commence. If the alleged violation is not cured within the
specified time, the employee may commence the civil action.
a. "Cure" means the employer abates each
violation alleged, he/she is in compliance with the
underlying statutes, and all aggrieved employees are
made whole.
4. Civil penalties recovered by aggrieved employees are
divided, giving 75 percent to the Labor and Workforce
Development Agency and 25 percent to the aggrieved
employees.
This Bill would amend PAGA in order to provide employers with
the right to cure a violation of law related to itemized wage
statements before a civil action can be brought by an aggrieved
employee. Specifically, this bill:
1. Provides that if the alleged violation involves the wage
statement's inclusion of (1) the name and address of the
employer, or (2) the inclusive dates of the pay period,
then the employer shall have an opportunity to "cure" the
violation before a PAGA claim may be filed.
2. Specifies that "cure" in this case means that the
employer has provided a fully compliant, itemized wage
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statement to aggrieved employees for each pay period of the
previous three-years.
3. Deletes references to obsolete provisions of law.
COMMENTS
1. Background on the Private Attorneys General Act of 2004
(PAGA):
The Labor Code Private Attorneys General Act went into effect
on January 1, 2004 pursuant to SB 796 (Dunn) of 2003. The
Legislative findings accompanying the enactment of SB 796
stated the following:
"Adequate financing of essential labor law enforcement
functions is necessary to achieve maximum compliance with
state labor laws in the underground economy and to ensure
an effective disincentive for employers to engage in
unlawful and anticompetitive business practices.
Although innovative labor law education programs and
self-policing efforts by industry watchdog groups may have
some success in educating some employers about their
obligations under state labor laws, in other cases the only
meaningful deterrent to unlawful conduct is the vigorous
assessment and collection of civil penalties as provided in
the Labor Code.
Staffing levels for state labor law enforcement agencies
have, in general, declined over the last decade and are
likely to fail to keep up with the growth of the labor
market in the future.
It is therefore in the public interest to provide that
civil penalties for violations of the Labor Code may also
be assessed and collected by aggrieved employees acting as
private attorneys general, while also ensuring that state
labor law enforcement agencies' enforcement actions have
primacy over any private enforcement efforts undertaken
pursuant to this act."
The author and sponsors of SB 796 argued that the bill would
address inadequacies in labor law enforcement in two major
ways. First, the bill assigned civil fine amounts to the
large number of Labor Code provisions, which previously
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carried prohibitions or criminal fines, but not civil
penalties. Second, it authorized the filing of civil actions
to recover existing and new civil penalties by aggrieved
workers acting as private attorneys general.
The provisions of PAGA were significantly amended by SB 1809
(Dunn) of 2004 by enacting specified procedural and
administrative requirements that must be met prior to bringing
a private action to recover civil penalties. Moreover, SB
1809 provided that no action shall be brought for a posting,
notice, agency reporting, or filing requirement, except as
specified. Provisions of SB 1809 also expanded judicial
review of PAGA claims by requiring courts to review and
approve any penalties sought as part of a proposed settlement
agreement, and those portions of settlements concerning
violations of health and safety laws. In addition, courts
were authorized to award a lesser amount if to do so otherwise
would result in an award that is unjust, arbitrary and
oppressive, or confiscatory.
2. Procedural Requirements under PAGA:
As discussed above, SB 1809 significantly amended the
provisions of the PAGA by enacting specified procedural and
administrative requirements that must be met prior to bringing
a private action to recover civil penalties. SB 1809
essentially enacted three different procedural requirements
depending on the type of violation.
First, for "serious" labor code violations, SB 1809
established a new procedure that an aggrieved employee must
follow prior to bringing a civil action to recover penalties
for enumerated, serious Labor Code violations (including, but
not limited to, violations of wage and hour, overtime, child
labor, agricultural, entertainment and garment industry labor
laws, and public works laws). First, the aggrieved employee
must provide written notice of the violation to the Labor and
Workforce Development Agency (LWDA) and to the employer. The
LWDA has 30 days to decide if it will investigate the
violation. If the LWDA decides to investigate, it must notify
the employer and the aggrieved employee within 33 days.
Within 120 days of that decision, the LWDA may investigate and
issue any appropriate citation. If the LWDA fails to act, the
aggrieved employee may pursue a civil action under PAGA.
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Second, it established specified "notice and cure" provisions
for those Labor Code violations not enumerated as "serious"
above, nor subject to the Cal-OSHA provisions specified below.
For these violations, the aggrieved employee must give
written notice to the LWDA and the employer of the alleged
violation. The employer may "cure" the violation within 33
days and give written notice to the employee and the LWDA of
its actions. If the violation is cured, no civil action
pursuant to PAGA may commence. If the alleged violation is not
cured, the aggrieved employee may commence a civil action
pursuant to PAGA. If the aggrieved employee disputes that the
alleged violation has been cured, the employee must provide
written notice to the employer and the LWDA - who must then
review the actions of the employer and make a determination.
If the LWDA determines that the violation has not been cured
or if the agency fails to provide timely or any notification,
the aggrieved employee may proceed with a civil action
pursuant to PAGA. If the agency has determined that the
alleged violation has been cured, but the employee still
disagrees, the employee may appeal that determination to the
superior court.
Finally, with regards to health and safety violations, SB 1809
established procedures that an aggrieved employee must follow
prior to initiating a civil action to recover penalties for
violations, other than sections that are specifically
enumerated as serious violations. First, the aggrieved
employee must give written notice to the Division of
Occupational Safety and Health (DOSH) within the Department of
Industrial Relations (DIR) and the employer of the alleged
violation. DOSH must inspect or investigate the alleged
violation and if DOSH issues a citation, no civil action
pursuant to PAGA may commence. If, by the end of the period
for inspection or investigation, DOSH fails to issue a
citation and the employee disputes that decision, the employee
may challenge the decision in the superior court. If the
court finds that DOSH should have issued a citation and orders
DOSH to issue a citation, then no civil action pursuant to
PAGA may commence. If DOSH fails to inspect or investigate
the alleged violation within the period specified in existing
law, the "notice and cure" provisions outlined above apply to
the determination of the alleged violation.
3. Recent Concerns over PAGA Litigation for "Minor" Violations:
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According to the author, recently some employers have reported
being sued under PAGA over very minor or technical violations
of the itemized wage statement requirements in law. These
examples include: (1) placing the company logo on the wage
statement rather than spelling out the name of the employer;
(2) failing to include items like "LLC", "LP", or "Inc." after
the name of the employer; and (3) listing the last date of the
pay period, but not the beginning date of the pay period (even
though the employees are paid every two weeks. Some employers
have reported that because the civil penalties can be quite
large, even for such minor violations, they have been forced
to settle such claims for hundreds of thousands of dollars
rather than risk higher penalty awards by litigating the
claims further.
The author cites as an example of such litigation, the case of
Elliot v. Spherion Pacific Work, LLC, 572 F.Supp.2d 1169
(2008), in which an employee alleged a cause of action under
Labor Code Section 226 because the employer used a truncated
name on the wage statement. Specifically, the employer's name
on the wage statement was "Spherion Pacific Work, LLC,"
instead of Spherion's legal name, "Spherion Pacific Workforce,
LLC." The employee did not allege that this truncated version
of the employer's name misled her, confused her, or caused her
any injury. Although the court ultimately dismissed this cause
of action, the employer incurred unnecessary legal costs and
attorney's fees to have it dismissed.
4. Need for this bill?
Under current law, alleged violations of Labor Code Section
226 are enumerated as "serious" violations under the first
procedural mechanism under PAGA. Therefore, an aggrieved
employee must first provide written notice of the violation to
the LWDA and to the employer. If the LWDA fails to act, the
aggrieved employee may pursue a civil action under PAGA for
the alleged violation.
Because of the recent upward trend of cases being filed under
PAGA for the minor violations of not including the dates of
the pay period or not including the correct name of the
employer, the author believes it is necessary to amend PAGA to
give employers the opportunity to "cure" such violations
before a case can be brought. This bill proposes to delete
Labor Code Section 226 from the list of enumerated "serious"
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violations described above. Therefore, these two specific
types of claims for violation of Labor Code 226 would fall
under the "notice and cure" provisions of PAGA giving employer
the ability to cure the alleged violation within the time
provided in PAGA.
All other remaining parts of the itemized wage statements
would remain as enumerated "serious" violations under PAGA for
which an employer would not have an opportunity to cure.
Moreover, the bill specifies that "cure" means that the
employer must issue fully compliant wage statements to
employees for the entire statutory period (three years). This
will ensure that employees are provided with accurate wage
statements but will also ensure that employers have an
opportunity to remedy the situation prior to facing litigation
over minor violations.
5. Proponent Arguments :
According to proponents, Under PAGA, an employee can
immediately sue for the Labor Code violations listed in Labor
Code Section 2699.5, including failure to include all the
information required in an itemized wage statement. Proponents
argue that this is one area in which employers have seen an
increase in frivolous litigation regarding technical
violations that do not harm or injure the employee. They cite
as an example a company who was sued for millions of dollars
in PAGA penalties and attorney's fees in Yolo County because
the itemized wage statement only included the ending date of
the pay period, yet specified the employee was paid on a
weekly basis. Proponents cite an April 16, 2014 Los Angeles
Daily Journal article titled "An Alternative to Employee Class
Actions," which reported that PAGA lawsuits have increased
over 400% between 2005 and 2013, given the ease of filing such
cases without satisfying class action requirements and the
potential financial windfall.
The author and proponents of this bill believe that it will
help curb this type of frivolous litigation under PAGA with
regard to only two sections of Labor Code, by allowing an
employer 33 days to cure any alleged violation. If the
employer cannot cure the violation, then the employee would
still be able file a civil action and obtain any unpaid wages,
penalties and attorney's fees. They argue that this reform
would provide the appropriate balance of allowing an employer
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to correct unintentional errors for minor violations without
the threat of a multi-million dollar lawsuit that could put
the employer out of business, while still protecting the
employee's ability to obtain accurate information.
6. Opponent Arguments :
None received.
7. Prior Legislation :
AB 588 (Grove) of 2015: Assembly Labor and Employment
Committee
AB 588 is almost identical to this bill and would have
provided an employer with the right to cure a violation of
wage statement law requirements before an employee may bring a
civil action under PAGA. The first bill hearing was canceled
at the request of the author.
SB 1255 (Wright) of 2012: Chaptered
SB 1255 provided a statutory definition of what constitutes
"suffering injury" for purposes of recovering damages pursuant
to the itemized wage statements requirements including failure
by the employer to provide a wage statement or failure to
provide accurate or complete information regarding the other
specified items, as specified.
SUPPORT
California Chamber of Commerce
Air Conditioning Trade Association
Associated Builders and Contractors of California
Associated Builders and Contractors - San Diego Chapter
Associated General Contractors
Association of California Insurance Companies
Brea Chamber of Commerce
California Ambulance Association
California Apartment Association
California Asian Pacific Chamber of Commerce
California Association of Bed and Breakfast Inns
California Association of Licensed Security Agencies, Guards and
Associations
California Association of Realtors
California Bankers Association
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California Business Properties Association
California Business Roundtable
California Cotton Ginners Association
California Cotton Growers Association
California Defense Counsel
California Employment Law Council
California Farm Bureau Federation
California Forestry Association
California Fresh Fruit Association
California Grocers Association
California Hotel and Lodging Association
California League of Food Processors
California Manufacturers and Technology Association
California Pool & Spa Association
California Professional Association of Specialty Contractors
California Restaurant Association
California Retailers Association
California State Council of the Society for Human Resource
Management
Camarillo Chamber of Commerce
Chambers of Commerce Alliance Ventura & Santa Barbara Counties
Civil Justice Association of California
CompTIA
Family Business Association of California
Fullerton Chamber of Commerce
Goleta Valley Chamber of Commerce
Greater Bakersfield Chamber of Commerce
Irvine Chamber of Commerce
Lodi Chamber of Commerce
National Federation of Independent Business
Oxnard Chamber of Commerce
Plumbing-Heating-Cooling Contractors Association of California
Rancho Cordova Chamber of Commerce
Sierra Pacific Industries
Simi Valley Chamber of Commerce
Southwest California Legislative Council
Torrance Area Chamber of Commerce
Valley Industry & Commerce Association
Verizon
Western Agriculture Processors Association
Western Electrical Contractors Association
Western Growers Association
Wine Institute
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OPPOSITION
None received
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