BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 1506|
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                                   THIRD READING 


          Bill No:  AB 1506
          Author:   Roger Hernández (D), et al.
          Amended:  8/31/15 in Senate
          Vote:     27 - Urgency

           SENATE LABOR & IND. REL. COMMITTEE:  5-0, 6/24/15
           AYES:  Mendoza, Stone, Jackson, Leno, Mitchell

           SENATE JUDICIARY COMMITTEE:  6-0, 7/7/15
           AYES:  Jackson, Moorlach, Hertzberg, Leno, Monning, Wieckowski
           NO VOTE RECORDED:  Anderson

           SENATE APPROPRIATIONS COMMITTEE:  Senate Rule 28.8

           ASSEMBLY FLOOR:  51-26, 5/4/15 - See last page for vote

           SUBJECT:   Labor Code Private Attorneys General Act of 2004


          SOURCE:    Author

          DIGEST:   This bill, under the Labor Code Private Attorneys  
          General Act of 2004 (PAGA), provides 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 before an employee may bring a civil action under the  
          act. This bill limits the employer's right to cure such a  
          violation to once in a 12-month period.

          Senate Floor Amendments of 8/31/15 (1) add Senator Mendoza as a  
          principal coauthor of the bill and Assemblymembers Dodd, Grove  
          as well as Senators Hertzberg, Leno, Moorlach, Stone and  








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          Wieckowski as coauthors; and (2) add an urgency clause stating  
          the need for the provisions to go into effect immediately in  
          order to incentivize prompt resolution of disputes over itemized  
          wage statements. 

          ANALYSIS: 
          
          Existing law:

          1)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):

             a)   Gross wages earned;

             b)   Total hours worked by the employee (except salaried  
               exempt employees);

             c)   Piece rate units earned and the applicable rate, if paid  
               on a piece rate basis;

             d)   All deductions;

             e)   Net wages earned;

             f)   Inclusive dates of the pay period;

             g)   Name of the employee and the last four digits of his/her  
               social security number or employee identification number; 

             h)   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

             i)   All applicable hourly rates during the pay period and  
               the corresponding number of hours the employee worked at  
               each hourly rate.    

          2)Provides an employee suffering injury as a result of a knowing  
            and intentional failure by an employer to comply with the  
            itemized statement requirements the right to recover specified  
            damages and reasonable attorney's fees and costs. 







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          3)Defines "suffering injury" as an employer's failure to provide  
            a wage statement with accurate and complete information 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  
               Social Security Number or employee ID. 

          4)Provides, under PAGA, that any provision of the Labor Code  
            that authorizes a civil penalty to be assessed and collected  
            for a violation of this code, may, as an alternative, be  
            recovered through a civil action in addition to the awarding  
            of reasonable attorney's fees and costs. 

          5)Provides, under PAGA, 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 after giving written notice to the Labor  
            and Workforce Development Agency (LWDA) and the employer of  
            the alleged violation, including the facts and theories to  
            support the allegation.  If no action is taken by the LWDA,  
            the aggrieved employee may commence a civil action.  

          6)Authorizes, for other specified violations not otherwise  
            enumerated as serious, an employer to "cure" the alleged  
            violation before a civil action may commence, meaning the  
            employer abates each violation to be in compliance with the  
            law and all aggrieved employees are made whole.  However, an  
            employer may not avail himself or herself of the cure  
            provisions more than three times in a 12-month period for the  
            same violation(s). 








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          This bill:

          1)Removes from the list of serious violations under PAGA an  
            employer's failure to include in the wage statement (a) the  
            inclusive dates of the pay period, and (b) the name and  
            address of the legal entity that is the employer. 

          2)Provides an employer with the opportunity to "cure" alleged  
            violations of these two requirements before a PAGA claim may  
            be filed. 

          3)Specifies that "cure" in this case means that the employer has  
            provided a fully compliant, itemized wage statement to each  
            aggrieved employee for each pay period of the previous  
            three-years from the date of the notice. 

          4)Prohibits an employer from availing himself or herself of the  
            notice and cure provisions for failing to accurately include  
            these items on the itemized wage statement more than once in a  
            12-month period for the same violation(s) contained in the  
            notice, regardless of the worksite location. 

          5)Removes cross-references to repealed statutes.

          Background 
          
          Private Attorneys General Act of 2004.  PAGA went into effect on  
          January 1, 2004 pursuant to SB 796 (Dunn, Chapter 906, Statutes  
          of 2003). According to the legislative findings accompanying the  
          enactment of SB 796, 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.  Prior to the bills  
          enactment, staffing levels for state labor law enforcement  
          agencies had declined and, unfortunately, have been unable to  
          keep up with the growth of the labor market. In enacting PAGA,  
          the Legislature emphasized the importance of providing another  
          avenue for the collection of civil penalties for violations of  
          the Labor Code.  PAGA authorized aggrieved employees to take  
          these cases to court while also ensuring that state labor law  
          enforcement agencies' enforcement actions have primacy over any  
          private enforcement efforts.
               







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          The provisions of PAGA were significantly amended by SB 1809  
          (Dunn, Chapter 221, Statutes of 2004) by enacting specified  
          procedural and administrative requirements that must be met  
          prior to bringing a private action to recover civil penalties.  
          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.

          Procedural requirements under PAGA.  As discussed above, SB 1809  
          significantly amended the provisions of the PAGA by enacting  
          specified procedural and administrative requirements. SB 1809  
          essentially enacted three different procedural requirements  
          depending on the type of violation and established "notice and  
          cure" provisions for violations of Labor Code not enumerated as  
          serious. For these violations, the aggrieved employee must give  
          written notice to the LWDA and the employer of the alleged  
          violation and 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, a  
          civil action pursuant to PAGA may commence, with some exceptions  
          for disputes on the alleged violation being cured. (NOTE:   
          Please see Senate Labor and Industrial Relations Committee  
          analysis for further discussion on these items.)

          Recent concerns over PAGA litigation for "minor" violations.   
          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.  Under existing law,  
          failure to provide 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.  

          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  







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          employee. 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 rather than risk higher  
          penalty awards by litigating the claims further.

          Proponents cite Elliot v. Spherion Pacific Work, LLC (2008) 572  
          F.Supp.2d 1169, as an example of this problem.  In this case,  
          Elliot, the plaintiff, a temporary employee, alleged her  
          employer failed to pay 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.

          The Elliot court also 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. 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  
          on the wages statements. Although the court ultimately dismissed  
          this cause of action, the employer incurred unnecessary legal  
          costs and attorney's fees to have it dismissed. 

          SB 1255 (Wright, Chapter 843, Statutes of 2012) 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.  

          Related Legislation
          







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          AB 588 (Grove, 2015) is substantially similar to this bill and  
          provides 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 allows employers to cure for all items  
          required on the wage statement while this bill only allows  
          employers to cure for failure to accurately include dates of the  
          pay period and the name and address of the legal entity that is  
          the employer before.  AB 588 is currently in the Assembly Labor  
          and Employment Committee. 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          SUPPORT:   (Verified8/31/15)


          Air Conditioning Trade Association 
          Associated Builders and Contractors - San Diego Chapter
          Associated Builders and Contractors of California
          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







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          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
          Goleta Valley Chamber of Commerce
          Greater Bakersfield Chamber of Commerce
          Irvine Chamber of Commerce
          Lodi Chamber of Commerce
          National Federation of Independent Business 
          North Orange County Chamber of Commerce
          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


          OPPOSITION:   (Verified8/31/15)


          None received


          ARGUMENTS IN SUPPORT:     Proponents argue that Labor Code  
          provisions regarding information required to be included in wage  
          statements 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  







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          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 believe that this bill 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 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. 

          ASSEMBLY FLOOR:  51-26, 5/4/15
          AYES:  Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,  
            Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman,  
            Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin,  
            Jones-Sawyer, Levine, Low, McCarty, Medina, Mullin, Nazarian,  
            Obernolte, O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas,  
            Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber,  
            Williams, Wood, Atkins
          NOES:  Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  
            Chávez, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones,  
            Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez,  
            Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk
          NO VOTE RECORDED:  Campos, Dahle, Lopez

          Prepared by:Alma Perez / L. & I.R. / (916) 651-1556
          9/1/15 21:19:54


                                   ****  END  ****








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