BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1513|
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THIRD READING
Bill No: AB 1513
Author: Williams (D)
Amended: 9/9/15 in Senate
Vote: 21
SENATE LABOR & IND. REL. COMMITTEE: 5-0, 6/24/15
AYES: Mendoza, Stone, Jackson, Leno, Mitchell
SENATE LABOR & IND. REL. COMMITTEE: 4-1, 9/9/15 (pursuant to
Senate Rule 29.10)
AYES: Mendoza, Jackson, Leno, Mitchell
NOES: Stone
ASSEMBLY FLOOR: 79-0, 4/16/15 (Consent) - See last page for
vote
SUBJECT: Employment: workers compensation and piece-rate
compensation.Employment: Workers compensation and
piece-rate compensation
SOURCE: Author
DIGEST: This bill provides an affirmative defense and safe
harbor for employers who, by December 15, 2016, fully compensate
their employees, as specified, for all under-compensated or
uncompensated rest periods, recovery periods, or unproductive
time between July 1, 2012 and December 31, 2015.
ANALYSIS:
Existing law:
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1)Requires that, when an employee is compensated on a "piece
rate" basis, the employer must include in the employee's wage
stub the number of piece-rate units earned and any applicable
piece rate if the employee is paid on a piece-rate basis.
(Labor Code §226)
2)Provides that, if an employee suffers injury as a result of a
knowing and intentional failure by an employer to provide a
wage stub, the employee 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 to exceed an aggregate penalty of
$4,000, and is entitled to an award of costs and reasonable
attorney's fees. (Labor Code §226 (e))
3)Provides that the Industrial Welfare Commission with the
ability to adopt or amend working condition orders with
respect to break periods, meal periods, and days of rest for
any workers in California consistent with the health and
welfare of those workers. (Labor Code §516)
4)Requires every employer to authorize and permit all employees
to take rest periods, which insofar as practicable shall be in
the middle of each work period. The employer must provide a
rest period of 10 minutes for every 4 hours worked, and rest
periods must be counted as hours worked and not be deducted
from the employee's wages. (IWC Wage Orders 1-15; Labor Code
§226.7)
5)Requires that, if an employer fails to provide an employee a
rest period, the employer must pay the employee one hour of
pay at the employee's regular rate of compensation for each
workday that the rest period is not provided.
(IWC Wage Orders 1-15; Labor Code §226.7)
6)Provides additional rest periods, known as recovery periods,
to provide employees with a cooloff period to avoid heat
illness. If an employer fails to provide an employee a
recovery period, the employer must pay the employee one hour
of pay at the employee's regular rate of compensation for each
workday that the rest period is not provided. (Labor Code
§226.7)
Existing court decisions require that nonproductive time, which
is time under the employer's control for which the employee is
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not producing "pieces", rest periods, and recovery periods must
be compensated separately and distinctly at the minimum wage or
more. (Gonzelez v. Downtown LA Motors (215 Cal.App.4th 36
(2013)) and Bluford v. Safeway Stores (C066074 (2013)))
This bill:
1)Codifies the Gonzalez and Bluford decisions that nonproductive
time, rest breaks, and recovery breaks are separately
compensated.
2)Codifies that, for rest and recovery periods, the rate of
compensation is the higher of the average hourly rate or the
applicable minimum wage.
3)Codifies that, for nonproductive time, the rate of
compensation is not less than the minimum wage.
4)Codifies how nonproductive time, rest breaks, and recovery
break compensation is calculated.
5)Allows employers to utilize an affirmative defense against
claims of an employer's failure to timely pay compensation due
for rest periods, recovery periods, and nonproductive time if
the alleged failure occurred between July 1, 2012, and
December 31, 2015 if the employer:
a) Make payments to all current and former piece-rate
employees for uncompensated or undercompensated rest and
recovery periods and nonproductive time, plus interest,
from July 1, 2012, to December 31, 2015; or
b) Make payments to all current and former piece-rate
employees in an amount equal to 4% of the gross earnings
from July 1, 2012, to December 31, 2015. Deductions for
previous separate payments for rest, recovery, and
nonproductive time are permitted, but must not exceed 1% of
the employee's gross earnings during the same period.
c) Provides a statement to the current and former employees
that shows the calculation of hours worked and how the
employer determined the wages due.
d) Provides payment to the current and former employees no
later than December 15, 2016.
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e) Provide notice to the Labor Commissioner on the
employer's election to make payments to current and former
employees by July 1, 2016.
f) Preserves all records of hours worked, calculations of
hours worked, and records of make whole payments to
employees until December 16, 2020, and also furnish these
records to the current or former employee upon request.
If the employer complies with the above, the employer shall
have an affirmative defense for any action that seeks back
wages, penalties, or liquidated damages relating to an
employer's failure to timely pay compensation due for rest
periods, recovery periods, and nonproductive time, including
to paying less than the minimum wage or having an inaccurate
wage stub.
6)Permits specified employers to have an additional four months
to program their payroll systems as long as the employer pays
piece rate employees for all rest and recovery periods at or
above the applicable minimum wage during the extension and
pays the difference between the amounts paid and the amounts
owed, plus interest, by April 30, 2016. To qualify for this
additional four months, an employer must:
a) Have been acquired by another legal entity on or after
July 1, 2015 and before October 1, 2015;
b) Have employed at least 4,700 employees in this state at
the time of the acquisition;
c) Have employed at least 17,700 employees nationwide at
the time of the acquisition; and
d) Have been a publically traded company on a national
securities exchange at the time of the acquisition.
7)Tolls the statute of limitations from January 1, 2016 to July
1, 2016 for any claims based on the failure to compensate rest
periods, recovery periods, and nonproductive time for
piece-rate compensated employees where the employer has not
provided notice to employees as discussed above. If the
employer has provided a notice to the former or current
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employee, the statute of limitations is tolled until December
15, 2016.
8)Prohibits the safe harbor from applying to any of the
following:
a) The damages or penalties were previously awarded in an
order or judgment that was final and not subject to further
appeal as of January 1, 2016;
b) Claims where the employees were not advised of their
right to take rest or recovery breaks, the breaks were not
made available, or employees were discouraged from taking
such breaks;
c) Claims based on the failure to provide paid rest
periods, recovery periods, or nonproductive time asserted
in an action filed prior to April 1, 2015 where the case
contains an allegation that the employer has intentionally
stolen wages through the use of fictitious worker names;
d) Claims asserted in a court filing prior to March 1, 2014
or claims asserted prior to March 1, 2014 and amended prior
to July 1, 2015;
e) Claims for unpaid wages, damages, and penalties that
accrue after January 1, 2016; and
f) An employer that is a new motor vehicle dealer.
Background
Piece rate compensation and recent court decisions. Piece rate
compensation, as the name suggests, is a method of calculating
worker compensation by piece or unit, rather than by hour. For
example, workers could be paid by unit sewn, bushel picked, or
truck unpacked. However, under both federal and state law, the
worker's compensation must still be at least the minimum wage
for the hours worked. This requirement is well established in
the law, and it was not the subject of recent litigation.
Rather, recent litigation addressed whether nonproductive time
and rest breaks needed to be counted as hours worked when
calculating the minimum wage equivalency for piece rate wages.
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As was discussed above, both Gonzalez and Bluford found that
rest periods, recovery periods, and nonproductive time must be
compensated separately and at least at the minimum wage. While
these decisions were in keeping with prior legal decision and
statutes in California, many stakeholders raised concerns on the
impact of Gonzalez and Bluford. For employers who did not
compensate their employees for their nonproductive time, the
potential liability from these decisions on employers can be
significant.
Post-Gonzalez, it is clear the employer would be liable for
separately compensated nonproductive time, rest breaks, and
recovery breaks. However, the employer would also face, at a
minimum, liability for paying less than the minimum wage,
producing an incorrect wage stub, and failure to provide rest
breaks. These violations trigger a penalty structure that is
geared for employers who refuse to follow the minimum wage law
and engage in wage theft, rather than employers who were caught
up in an adverse court decision. This creates a challenging
dynamic: while on one hand some employers may be facing
insolvency due to liability they could not foresee, aggrieved
workers are owed wages for their time.
Comments
How AB 1513 works. Broadly speaking, AB 1513 can be divided
into two portions. The first portion deals with separate
compensation for nonproductive time and rest and recovery
periods. The second portion creates a narrow safe harbor for
employers to address their liability under Gonzalez and Bluford.
Each with be discussed below.
Piece rate compensation and separate compensation for
nonproductive time and rest and recovery periods. As noted
above, both Gonzalez and Bluford held that piece rate workers
must separately compensate the workers' nonproductive time, as
well as their rest and recovery breaks. AB 1513 codifies that
requirement, with nonproductive time being separately
compensated at the minimum wage or higher. Importantly, however,
rest and recovery periods would be separately compensated as an
average of the hourly piece rate. By doing so, it would ensure
that workers are not facing a disincentive in the form of a
lower average hourly wage if they take necessary breaks for
their health and well-being.
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AB 1513's safe harbor provisions. As was discussed above, AB
1513 contains an unusual provision: a limited safe harbor for
employers from claims resulting from Gonzalez and Bluford. In a
nutshell, the AB 1513 safe harbor provides an 11 month window
for the employer to do the following:
1)Calculate back wages for both former and current workers;
2)Notifying the Division of Labor Standards Enforcement that the
employer is utilizing the safe harbor;
3)Transmitting the back wages the effected workers, including
information on how the back wages were calculated; and
4)If, after due diligence, a worker cannot be found,
transmitting the wages to DLSE, with a processing fee.
If an employer decides to do all of the above, he or she would
have a limited safe harbor from resulting from the Gonzalez and
Bluford decisions. However, it is important to note that the
safe harbor isn't a simple immunity from claims due to
underpayment or nonpayment of nonproductive time and/or rest and
recovery periods. Rather, it is an affirmative defense - the
employer would need to prove-up that he or she met the above
requirements. Outside of a good faith error, the employer loses
the affirmative defense if he or she fails to meet the above
requirements, and therefore loses access to the safe harbor.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified9/10/15)
California Conference of Machinists
California Labor Federation
California Teamsters Public Affairs Council
California Trucking Association
Driscoll's Strawberry Associates, Inc.
Grimmway Enterprises, Inc.
Maricopa Orchards
Monterey County Farm Bureau
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The Wonderful Company
OPPOSITION: (Verified9/10/15)
California Citrus Mutual
California Cotton Growers Association
California Cotton Ginners Association
California Employment Law Council
California Fresh Fruit Association
California Grain and Feed Association
California Pear Growers Association
California Tomato Growers Association
Nisei Farmers League
Western Agricultural Processors Association
ARGUMENTS IN SUPPORT: Proponents argue that AB 1513
addresses a historically vexing challenge of calculating
appropriate piece rate compensation, yet balances the needs of
workers and employers. Specifically, proponents note that AB
1513 provides clear guidance for employers on appropriate wages
during rest periods, recovery periods, and nonproductive time,
and that these wage rates would not create disincentives for
workers who want to take their breaks. Proponents also note that
AB 1513 that provides an affirmative defense for employers, but
only if they retroactively compensate employees for their rest
periods, recovery periods, and nonproductive time. Proponents
argue that AB 1513 is a fair compromise for both employers and
workers, addressing a situation where there was a significant
development in case law.
ARGUMENTS IN OPPOSITION: Opponents, including California
Citrus Mutual and the California Cotton Growers Association,
oppose AB 1513. While acknowledging that AB 1513 allows
employers to come into compliance and avoid continued exposure
from non-productive time wage claims, opponents argue that AB
1513 contains provisions that unfairly excludes participation by
some agricultural employers. Opponents argue that safe-harbor
exclusions, as expressly inserted by use of the March 1, 2014
date sacrifices some companies to continued legal exposure in
exchange for legal protections afforded to others. Opponents
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also point to the provision excluding any company for which an
active claim is open alleging the adding of "ghost" employees to
reduce or eliminate employee wages from use of payment
calculation formulas and exposure protections afforded by AB
1513.
ASSEMBLY FLOOR: 79-0, 4/16/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Perea, Rendon, Ridley-Thomas, Rodriguez, Salas,
Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,
Waldron, Weber, Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Quirk
Prepared by: Gideon L. Baum / L. & I.R. / (916) 651-1556
9/11/15 8:43:13
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