BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 1506 (Roger Hernández)
Version: June 30, 2015
Hearing Date: July 7, 2015
Fiscal: Yes
Urgency: No
TMW
SUBJECT
Labor Code Private Attorneys General Act of 2004
DESCRIPTION
This bill, under the Labor Code Private Attorneys General Act of
2004 (PAGA), would provide an employer with the right to cure a
violation of failing to provide its employees with a wage
statement containing the inclusive dates of the pay period and
the name and address of the legal entity that is the employer.
BACKGROUND
In 2003, the Labor Code Private Attorneys General Act of 2004
(PAGA) was enacted and authorized employees to file civil
actions against employers for civil penalties otherwise assessed
or collected by the Labor and Workforce Development Agency.
(See SB 796 (Dunn, Chapter 906, Statutes of 2003).) The civil
penalties and private right of action established by SB 796 were
intended to improve Labor Code enforcement since state labor law
enforcement agencies had fallen drastically behind the growth in
the labor force and the lack of enforcement was expected to
worsen with the state budget crisis. Before PAGA was enacted,
many Labor Code violations were punishable only as misdemeanors,
with no civil penalty or other sanction attached. Since
district attorneys tend to direct their resources to violent
crimes and other public priorities, Labor Code violations rarely
resulted in criminal investigations and prosecutions. (Sen.
Rules Com., Off. of Sen. Floor Analyses, Unfinished Bus.
analysis of Sen. Bill No. 1809 (2003-2004 Reg. Sess.) p. 6.)
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To address business group concerns that PAGA tipped the balance
of labor law protection in disproportionate favor of employees
by encouraging private attorneys to act as bounty hunters
pursuing frivolous violations on behalf of employees, SB 1809
(Dunn, Chapter 221, Statutes of 2004) specified procedural and
administrative requirements in order for an aggrieved employee
to file a civil action under PAGA to recover civil penalties
against an employer, prohibited a PAGA action for posting,
notice, agency reporting, and filing requirements, expanded
judicial review to proposed PAGA settlement agreements, and
authorized the court to award a lesser civil penalty, as
specified.
PAGA provides a list of serious Labor Code violations that do
not provide an employer a right to cure or the ability to fix
the violation before the employee can file the civil action for
penalties. Labor Code Section 226 violations (dealing with the
requirement for an itemized wage statement) are among the list
of serious violations that do not qualify an employer for a
right to cure under PAGA. Labor Code violations not
specifically enumerated are subject to the employee notice and
employer's right to cure provisions.
Since 1943, the Legislature has recognized the importance of
providing an itemized wage statement to employees. In 1976, the
Legislature enacted AB 3731 (Lockyer, Chapter 832, Statutes of
1976), which provided employees with specified damages if they
could demonstrate they had suffered damages due to the
employer's failure to provide wage statement information. AB
3731 was enacted to ensure that employees were adequately
informed of compensation received, that the employees were not
being short changed their wages, and to assist employees
establish eligibility for unemployment insurance. Labor Code
Section 226 subsequently has been amended numerous times to
require additional information to be itemized on the wage
statement, and to provide additional damages to an employee.
In 2012, after several court cases resulted in differing
standards for whether an employee has suffered injury from an
employer's failure to provide required information on a wage
statement, SB 1255 (Wright, Chapter 843, Statutes of 2012)
provided a statutory definition of what constitutes "suffering
injury" for purposes of recovering damages pursuant to the
itemized wage statement requirements, including failure by the
employer to provide a wage statement or failure to provide
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accurate or complete information regarding the other specified
items, as specified.
Similarly, this bill seeks to address several court cases that
have resulted in large civil penalties resulting from an
employer's failure to provide in the itemized wage statement the
employer's entire legal name and the inclusive dates of the
period for which the employee is paid.
CHANGES TO EXISTING LAW
Existing law , the Labor Code Private Attorneys General Act of
2004, authorizes an aggrieved employee to bring a civil action
to recover specified civil penalties that would otherwise be
assessed and collected by the Labor and Workforce Development
Agency, on behalf of the employee and other current or former
employees for the violation of certain provisions affecting
employees. (Lab. Code Sec. 2699.)
Existing law provides a list of 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) for which an
aggrieved employee may commence a civil action for civil
penalties that could otherwise be assessed or collected by the
Labor and Workforce Development Agency (LWDA). (Lab. Code Sec.
2699.5.) This list includes a violation for failing to provide
an accurate itemized statement in writing detailing specified
wage, employer, and employee information. (Id.)
Existing law requires an employer to provide, as specified,
either as a detachable part of the check, draft, or voucher
paying the employee's wages, or separately when wages are paid
by personal check or cash, an accurate itemized statement in
writing showing (1) gross wages earned, (2) total hours worked
by the employee, as specified, (3) the number of piece-rate
units earned and any applicable piece rate if the employee is
paid on a piece-rate basis, (4) all deductions, provided that
all deductions made on written orders of the employee may be
aggregated and shown as one item, (5) net wages earned, (6) the
inclusive dates of the period for which the employee is paid,
(7) the name of the employee and only the last four digits of
his or her social security number or an employee identification
number other than a social security number, (8) the name and
address of the legal entity that is the employer and, if the
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employer is a farm labor contractor, as defined, the name and
address of the legal entity that secured the services of the
employer, and (9) all applicable hourly rates in effect during
the pay period and the corresponding number of hours worked at
each hourly rate by the employee and, beginning July 1, 2013, if
the employer is a temporary services employer as defined in
Section 201.3, the rate of pay and the total hours worked for
each temporary services assignment. (Lab. Code Sec. 226(a).)
Existing law provides that for serious violations, including
failure to provide any of the information required to be
itemized above, an aggrieved employee may bring a civil action
against an employer for civil penalties after the employee gives
written notice by certified mail to the Labor and Workforce
Development Agency and the employer of the specific provisions
alleged to have been violated, including the facts and theories
to support the alleged violation. (Lab. Code Sec.
2699.3(a)(1).) The aggrieved employee may commence a civil
action, after a specified waiting period, upon receiving notice
from the Agency that it does not intend to investigate the
alleged violation, or, if after an investigation, the Agency
does not intend to issue a citation. (Lab. Code Sec.
2699.3(a)(2).)
Existing law provides that for other specified Labor Code
violations or violations not otherwise enumerated as serious
violations, an employer is entitled to notice of the violations,
as specified, and has a right to cure the violation before the
aggrieved employee may bring a civil action against an employer
for civil penalties. (Lab. Code Sec. 2699.3(c)(2)(A).)
However, an employer may not avail himself or herself of the
notice and cure provisions more than three times in a 12-month
period for the same violation or violations contained in the
notice, regardless of the location of the worksite. (Lab. Code
Sec. 26933(c)(2)(B).)
Existing law defines "cure" to mean that the employer abates
each violation alleged by any aggrieved employee, the employer
is in compliance with the underlying statutes as specified in
the employee's notice, and any aggrieved employee is made whole.
This bill would remove from the enumerated list of serious
violations an employer's failure to include in the wage
statement the inclusive dates of the period for which the
employee is paid and the name and address of the legal entity
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that is the employer.
This bill would require an aggrieved employee to provide notice
of the alleged violations and a right to cure to the employer
for failing to detail the inclusive dates of the period for
which the employee is paid and the name and address of the legal
entity that is the employer.
This bill would include in the definition of "cure" that a
violation of the detailed wage statement that fails to provide
the inclusive dates of the period for which the employee is paid
and the name and address of the legal entity that is the
employer is only considered cured upon a showing that the
employer has provided a fully compliant, itemized wage statement
to each aggrieved employee for each pay period for the
three-year period prior to the date of the employee's notice.
This bill would prohibit an employer from availing himself or
herself of the notice and right to cure provisions, with respect
to allegations of failing to provide a wage statement that
details the inclusive dates of the period for which the employee
is paid and the name and address of the legal entity that is the
employer, more than once in a 12-month period for the same
violation or violations contained in the notice, regardless of
the location of the worksite.
This bill would also remove cross-references to repealed
statutes.
COMMENT
1. Stated need for the bill
The author writes:
Recently, some employers have reported being sued over very
minor or technical violations of the itemized wage statement
requirements. 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.)
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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.
AB 1506 attempts to strike a balance between protecting the
integrity and importance of wage statements and providing some
relief to employers from litigation over minor violations. AB
1506 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 any [Labor Code Private Attorneys General Act of 2004
(PAGA)] claim may be filed.
However, 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.
2. Removing failure to provide certain wage statement details
from list of serious violations under PAGA
Existing law requires every employer to furnish each of its
employees with an accurate itemized statement, as specified,
that shows, among other things, the inclusive dates of the
period for which the employee is paid and the name and address
of the legal entity that is the employer. (Lab. Code Sec.
226(a)(6), (8).) Existing law provides that all information
required to be included in the wage statement is a serious
violation subject to PAGA and does not provide an employer the
right to cure the violation before the aggrieved employee can
sue the employer for civil penalties. (Lab. Code Secs. 2699.3,
2699.5.)
Proponents argue that wage statement violations are one area in
which employers have seen an increase in frivolous litigation
regarding technical violations that do not harm or injure the
employee. Proponents cite to Elliot v. Spherion Pacific Work,
LLC (2008) 572 F.Supp.2d 1169, as an example of this problem.
In Elliot, the plaintiff, a temporary employee, alleged her
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employer failed to pay the employee in a timely manner, failed
to pay her for time worked, and issued wage statements that did
not include all of the information required by state and federal
law, and the complaint included a claim for civil penalties
under PAGA. With respect to the wage statements, the plaintiff
argued that the employer included a truncated version of the
employer's name on the wage statements, which referred to
"Spherion Pacific Work, LLC," but the full name of the employer
was Spherion Pacific Workforce, LLC. (Id., pp. 1173, 1179.)
The court discussed the legislative intent of the wage statement
requirement that an employer provide its legal name and address,
and noted that "[i]f the legislature had intended to require an
employer to show its complete name on wage statements, it would
have stated so in this section. Indeed, the specificity
required in the remainder of section 226(a) -- requiring, for
example, various subcategories of information relating to pay
rates, hours worked, and deductions -- demonstrates that, when
the legislature drafted this statute, it well knew how to
require highly detailed information on wage statements. By
contrast, instead of requiring an employer to state its
'complete' or 'registered' name, section 226(a)(8) only requires
the employer to state its 'name and address.' Because Defendant
was the 'legal entity' that employed Plaintiff, and because
Defendant showed its 'name and address,' Defendant complied with
section 226(a)(8)." (Id., pp. 1179, 1180.)
The Elliot court then discussed whether the plaintiff suffered
any injury due to the truncated employer's name on the wage
statement and reviewed other cases in which an employer failed
to provide the required information on a wage statement. (Id.,
p. 1181.) The court noted that the injuries to employees in
those cases included the possibility of not being paid overtime,
employee confusion over whether they received all wages owed
them, difficulty and expense involved in reconstructing pay
records, and forcing employees to make mathematical computations
to analyze whether the wages paid in fact compensated them for
all hours worked. (Id.) The Elliot court held that the
employee provided no evidence that she suffered injury of any
sort due to the employer's use of a slightly truncated name of
the wages statements, and the PAGA claim, along with all of the
plaintiff's causes of action for labor violations, failed as a
matter of law, and the employer's motion for summary judgment of
the employee's action was granted. (Id., p. 1181.)
Notably, SB 1255 (Wright, Chapter 843, Statutes of 2012)
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attempted to address frivolous wage statement actions by
defining what constitutes suffering injury from the employer's
failure to provide the required information in a wage statement.
However, proponents argue that numerous PAGA lawsuits have been
filed for technical violations of wage statements that do not
cause any harm to employees. Further, proponents assert that
because of the substantial civil penalties under PAGA, PAGA
claims are commonly filed by plaintiffs with other claims as a
bargaining chip.
One example is Willner v. Manpower, Inc. (2014) 35 F.Supp.3d
1116, in which the plaintiff, a temporary employee, alleged the
employer failed to pay timely weekly wages under Labor Code
Section 201.3(b)(1), failed to furnish accurate wage statements
under Labor Code Section 226, and violated the Unfair
Competition Law by failing to provide accurate wage statements
and to pay timely wages. The plaintiff claimed penalties under
PAGA for failure to furnish accurate wage statements and to pay
timely wages, and failure to pay timely wages due at separation
under Labor Code Sections 201 and 203. With respect to the wage
statement violations, the plaintiff alleged that the wage
statements failed to contain the inclusive dates of the period
for which the employee was paid and failed to state the
employer's address. (Id., p. 1128.) The employer argued that
the wage statements issued to the plaintiff, as a temporary
employee, included every work date for which the plaintiff was
paid, and the employer's address appeared on the checks attached
to the wage statements and on the front of the envelopes
containing the statements. (Id., pp. 1128-1129.) The court,
denying the employer's motion for summary judgment, concluded
that the evidence established that the wage statements failed to
comply with Section 226(a)(6), requiring the inclusive dates of
the pay period, and Section 226(a)(8), requiring the name and
address of the legal entity that is the employer, which
satisfied the plaintiff's first element of her claim for damages
under Section 226(e). (Id., p. 1129.)
Following the court's ruling on the plaintiff's and defendant's
motions for summary judgment, the employer entered into a
settlement agreement with the plaintiff, which was reviewed in
June of this year by the court as required under PAGA. (Willner
v. Manpower, Inc. (2015) U.S. Dist. LEXIS 80697.) The employer
settled the class action for $8.75 million, which represented
"between 30 and 35 percent of the recovery that the plaintiff
class estimated would be likely at trial if Plaintiff were to
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prevail, and included payments to the class, attorneys' fees for
$2,625,000 and costs for $33,300; a service award to Plaintiff;
PAGA penalties payable to the California Labor and Workforce
Development Agency in the amount of $65,625.00; a $25,000.00
hold-back fund to cover payments to claimants who were
mistakenly omitted from the class list and/or whose eligible
paystub count was incorrectly calculated; and $102,000.00 in
estimated costs of settlement administration." (Id., p. 4.) In
reviewing the settlement agreement, the court noted that risk,
expense, complexity, and likely duration of the case favored
settlement. (Id., p. 9.) On this point, the court stated that
"[a]bsent settlement, Class Counsel 'anticipate a vigorous and
lengthy challenge to both class certification and the merits of
Plaintiff's claims.' [Citations omitted.] The litigation
history in this case supports this prediction. Plaintiff's
efforts to obtain class certification, establish liability, and
present evidence regarding damages and penalties may take years,
and any recovery might be further delayed by appellate
proceedings. [] This factor favors approval, which offers
immediate and certain recovery to class members." (Id., pp.
9-10.) The court also noted that the lawsuit also precipitated
the employer's decision to change its wage statements to include
its employer address and the pay period beginning date, which
would continue to benefit all of the employer's hourly employees
in California by enabling them to more easily verify the correct
payment of their wages. (Id., p. 11.)
Proponents note that the April 16, 2014 , Los Angeles Daily
Journal article titled "An Alternative to Employee Class
Actions," documents that PAGA lawsuits have increased over 400
percent between 2005 and 2013, given the ease of filing such
cases without satisfying class action requirements and the
potential financial windfall. Proponents argue that this bill
would help curb this type of frivolous litigation under PAGA
with regard to only two sections of Labor Code Section 226,
specifically paragraphs (a)(6) (requiring the inclusive dates of
the pay period) and (8) (employer's legal name and address), by
allowing an employer 33 days to cure any alleged violation.
Under PAGA, for non-serious labor violations, the employer is
entitled to notice of the violations and a right to cure before
the employee can file the PAGA action. (Lab. Code Sec.
2699.3(c).) If the employer cannot cure the violation, then the
employee would still be able to file a civil action and obtain
any unpaid wages, penalties, and attorney's fees. Proponents
contend that this bill would provide the appropriate balance of
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allowing an employer to correct unintentional errors 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.
3. Limitations on right to cure
The Consumer Attorneys of California raised the concern that
this bill would allow employers to violate the wage statement
requirements, be given the opportunity to correct the wage
statements, correct the wage statements, then violate the law
again. To address this concern, the bill was recently amended
to limit an employer's right to cure pay statement violations,
as specified in this bill, to one time in a 12-month period.
Support : 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; California Business Properties Association;
California Business Roundtable; California Chamber of Commerce;
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; Computing Technology
Industry Association; 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;
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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
HISTORY
Source : Author
Related Pending Legislation : AB 588 (Grove, 2015) is
substantially similar to this bill and would provide an employer
with the right to cure a violation of wage statement law
requirements before an employee may bring a civil action under
PAGA. AB 588 is currently in the Assembly Labor and Employment
Committee.
Prior Legislation :
SB 1255 (Wright, Chapter 843, Statutes of 2012) See Background;
Comment 2.
AB 1319 (Krekorian, Chapter 286, Statutes of 2009) repealed,
revised, and recast provisions of the Labor Code regulating
advance-fee talent services cross-referenced in the list of
serious violations under the Labor Code Private Attorneys
General Act of 2004 (PAGA).
SB 1809 (Dunn, Chapter 221, Statutes of 2004) See Background.
SB 796 (Dunn, Chapter 906, Statutes of 2003) See Background.
AB 3731 (Lockyer, Ch. 832, Stats. 1976) See Background.
Prior Vote :
Senate Labor and Industrial Relations Committee (Ayes 5, Noes 0)
Assembly Floor (Ayes 51, Noes 26)
Assembly Appropriations Committee (Ayes 12, Noes 5)
Assembly Labor and Employment Committee (Ayes 5, Noes 2)
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