BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1506| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 AB 1506 Page 2 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. AB 1506 Page 3 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). AB 1506 Page 4 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. AB 1506 Page 5 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 AB 1506 Page 6 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 AB 1506 Page 7 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 AB 1506 Page 8 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 AB 1506 Page 9 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 **** AB 1506 Page 10