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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