BILL ANALYSIS Ó
AB 1513
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Date of Hearing: September 11, 2015
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
AB 1513
(Williams) - As Amended September 9, 2015
SUBJECT: Employment: workers' compensation and piece-rate
compensation.
SUMMARY: (1) Deletes three obsolete study requirements for the
worker' compensation system; (2) clarifies and codifies the pay
requirements for piece rate workers for nonproductive time and
rest and recovery period time; and (3) establishes a process
through which employers, during a prescribed time period, can
make back wage payments for rest and recovery periods and
nonproductive time in exchange for relief from statutory
penalties and other damages. Specifically, this bill:
1)Provides that for employees compensated on a piece rate basis
during a pay period, the following shall apply for that pay
period:
a) Employees shall be compensated for rest and recovery
periods and other nonproductive time separate from any
piece rate compensation.
b) The itemized wage statement required under existing law
shall provide specified information.
c) Employees shall be compensated for rest and recovery
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periods at regularly hourly rate of pay that is no less
than the higher of:
i) An average hourly rate determined by dividing the
total compensation for the workweek, exclusive of
compensation for rest and recovery periods and any
premium compensation for overtime, by the total hours
worked during the workweek, exclusive of rest and
recovery periods.
ii) The applicable minimum wage (as defined).
d) Employees shall be compensated for other nonproductive
time at an hourly rate that is no less than the applicable
minimum wage.
e) The amount of other nonproductive time may be determined
either through actual records or the employer's reasonable
estimates, whether for a group of employees or for a
particular employee, of other nonproductive time worked
during the pay period.
f) An employer who is found to have made a good faith error
in determining the total or estimated amount of other
nonproductive time worked during the pay period shall
remain liable for the payment of compensation for all hours
worked in other nonproductive time, but shall not be liable
for specified civil penalties or liquidated damages based
solely on that error, provided that specified requirements
are met.
2)Provides that specified employers will shall have until April
30, 2016, to program their payroll systems to perform and
record the calculations required to comply with the
requirements for compensation for rest and recovery periods,
and itemized statements, so long as the employer pays piece
rate employees for all rest and recovery periods at or above
the applicable minimum wage from January 1, 2016 to April 30,
2016, and pays the difference between the amounts paid and the
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average rate that would be owed, plus interest, by no later
than April 30, 2016. This provision shall only apply to an
employer that meets all of the following:
a) The employer was acquired by another legal entity on or
after July 1, 2015, and before October 1, 2015.
b) The employer employed at least 4,700 employees in this
state at the time of the acquisition.
c) The employer employed at least 17,700 employees
nationwide at the time of the acquisition.
d) The employer was a publicly traded company on a national
securities exchange at the time of the acquisition.
3)Provides the employer shall have an affirmative defense to any
claim or cause of action for recovery of wages, damages,
liquidated damages, statutory penalties, or civil penalties,
based solely on the employer's failure to timely pay the
employee the compensation due for rest and recovery periods
and other nonproductive time for time periods prior to and
including December 31, 2015, if, by December 15, 2016, an
employer complies with all of the following:
a) The employer makes payments to each of its employees for
previously uncompensated or undercompensated rest and
recovery periods and other nonproductive time from July 1,
2012 to December 31, 2015 using either of the following
formulas:
i) The employer determines and pays the actual sums due
together with accrued interest.
ii) The employer pays each employee an amount equal to 4
percent of that employee's gross earnings in pay periods
in which any work was performed on a piece rate basis
from July 1, 2012 to December 31, 2015, as specified.
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b) Payment shall not be required for any part of the time
period for which either of the following apply:
i) An employee has, prior to August 1, 2015, entered
into a valid release of claims not otherwise banned by
the Labor Code or any other applicable law for
compensation for rest and recovery periods and other
nonproductive time.
ii) A release of claims covered by this bill executed in
connection with a settlement agreement filed with a court
prior to October 1, 2015 and later approved by the court.
c) By no later than July 1, 2016, the employer provides
written notice to the Department of Industrial Relations of
the employer's election to make payments to its current and
former employees in accordance with the requirements
outlined above.
d) The employer calculates and begins making payments to
employees as soon as reasonably feasible after it provides
the notice and completes the payments by no later than
December 15, 2016.
e) The employer provides each employee receiving a payment
with an accompanying accurate statement that contains
specified information.
4)Provides that an employer who makes a reasonable and good
faith error to make the payments described above and to
provide the accurate statement, shall not lose the affirmative
defense if the employer, within 30 days of discovery or notice
of the error, makes the payment plus interest and provides the
accurate statement. The employer shall have the burden of
proving that a failure to pay an employee was solely the
result of good faith error.
5)Provides specified tolling provisions related to the statute
of limitations.
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6)Provides that any notice to the Labor and Workforce
Development Agency (LWDA) on or before December 31, 2015
pursuant to the Private Attorneys General Act of 2004 (PAGA)
alleging violations based upon failure to properly compensate
employees for rest and recovery periods, is void as to those
alleged violations. Beginning January 1, 2016, an aggrieved
employee or representative shall give such written notice by
certified mail to both the LWDA and the employer of any
violation based on failure to compensate employees fully for
rest and recovery periods and other nonproductive time.
7)Provides that the affirmative defense and related provisions
shall not apply to any of the following:
a) Damages and penalties previously awarded in an order or
judgment that was filed and not subject to further appeal
as of January 1, 2016.
b) Claims based on the failure to provide paid rest or
recovery periods or pay for other nonproductive time for
which all of the following are true:
i) The claim was asserted in a court pleading filed
prior to March 1, 2014, or was asserted in an amendment
to a claim that relates back to a court pleading filed
prior to March 1, 2014, and the amendment or permission
for amendment was filed prior to July 1, 2015.
ii) The claim was asserted against a defendant named
with specificity and joined as a defendant, as specified.
c) Claims that employees were not advised of their right to
take rest or recovery periods, that rest and recovery
periods were not made available, or that employees were
discouraged or otherwise prevented from taking such breaks.
d) Claims for unpaid wages, damages, and penalties that
accrue after January 1, 2016.
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e) Claims for paid rest or recovery periods or pay for
other nonproductive time that were made in any case filed
prior to April 1, 2015, when the case contained by that
date an allegation that the employer has intentionally
stolen, diminished, or otherwise deprived employees of
wages through the use of fictitious worker names or names
of workers that were not actually working.
f) An employer that is a new motor vehicle dealer.
8)Provides that nothing in this bill shall limit or bar any
action or proceeding by the Labor Commissioner or any private
party for any failure to provide a rest and recovery period in
accordance with any provision of law, other than actions or
proceedings based solely on the employer's failure to timely
pay the compensation due for rest and recovery periods.
9)Provides that nothing in this bill precludes a judge from
awarding statutory, contractual or common fund attorney's fees
or costs in connection with an action filed before October 1,
2015.
10)Contains a January 1, 2021 sunset date on the affirmative
defense and related provisions of the bill.
FISCAL EFFECT: Unknown
COMMENTS: As passed by the Assembly, this bill deleted three
obsolete study requirements for the workers' compensation
system. However, Senate amendments add new language related to
compensation requirements for rest or recovery periods and other
nonproductive time for employees paid on a piece rate basis.
Existing law prohibits an employer from requiring employees to
work during a meal or rest or recovery period mandated pursuant
to an applicable statute, regulation, standard or order of the
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Industrial Welfare Commission (IWC), the Occupational Safety and
Health Standards Board, or the Division of Occupational Safety
and Health. Failure to provide an employee with a meal or rest
or recovery period entitles the employee to one additional hour
of pay at his or her regular rate of compensation for each
workday that the meal, rest or recovery period is not provided.
Existing IWC Wage Orders generally state that "authorized rest
periods shall be counted as hours worked for which there shall
be no deduction from wages." In addition, recently enacted
legislation codified and clarified the requirement that a
legally mandated rest or recovery period is counted as hours
worked and therefore, shall not result in any deductions from an
employee's wages. (SB 1360 (Padilla), Chapter # 72, Statutes of
2014).
Therefore, there is generally no dispute that rest periods are
hours worked for which employees must be paid. However, recent
court decisions have addressed disputes about the exact nature
of such compensation for employees paid on a piece rate basis,
in particular with respect to the calculation of compensation
for such rest periods and other nonproductive work time.
In March 2013, the California Court of Appeal held that
California's minimum wage law requires employers who compensate
employees on a piece rate basis to also pay those employees a
separate hourly wage for all other time worked, including work
performed before, after and between piece rate tasks
("non-productive time"). Gonzalez v. Downtown LA Motors LP, 215
Cal. App. 4th 36 (2013). In that case, the court held that
automobile service technicians who were paid on a piece rate
basis must also be paid at least the minimum hourly wage for the
time they were required to wait between their piece-rate repair
work. The court noted that California law requires that
employees be paid "not less than the applicable minimum wage for
all hours worked in the payroll period, whether the remuneration
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is measured by time, piece, commission, or otherwise."
The Gonzalez case did not specifically involve the situation of
rest periods. However, that issue was addressed in a subsequent
California Court of Appeals decision in Bluford v. Safeway, 216
Cal. App. 4th 846 (2013). In that case, truck drivers were
compensated primarily on the basis of miles driven and the
performance of specific tasks, a common piece rate system of
compensation. However, the plaintiffs alleged that this
compensation system failed to provide them paid rest breaks as
required by law because they were not paid a separate hourly
wage for such breaks. The defendant argued that the piece rate
compensation system already included compensation for rest
breaks. However, the court held that piece rate compensation
could not be "averaged" over non-piece rate (or rest break)
time, and that such rest periods could not therefore be
considered paid as required by California law.
Therefore, taken together, these recent court cases clarified
that piece-rate workers must be separately compensated for
non-productive time and rest and recovery periods.
While the Gonzalez and Bluford decisions were in keeping with
prior legal decisions and statutes in California, many employers
have expressed concern about liability since they had not
previously compensated employees paid on a piece rate system in
such a manner. They and others have expressed concerns that
these decisions may generate significant litigation and
administrative workload for employers, the courts, and the Labor
Commissioner, in actions to recover back wages and penalties.
This litigation will be costly and there is significant
uncertainty whether workers will recover back pay, and when that
may occur.
Therefore, this bill represents compromise in an attempt to
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address many of these concerns. The legislation provides a
means to resolve these issues in a way that is intended to: (1)
reach more piece-rate workers and provide larger and more timely
back pay recoveries than could be expected through litigation;
(2) relieve employers of related liability for statutory
penalties and damages for past violations; and (3) clarify
compensation requirements going forward in a way that protects
the right of piece-rate workers to be fully compensated for rest
and recovery periods and other nonproductive time.
Among other things, this bill contains the following elements:
Prospective Pay Requirements for Rest and Recovery Breaks
Employers will be required to pay an average hourly rate that
takes into account all earnings, with no reduction in pay during
mandated breaks. This rate will 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.
Prospective Pay for Other Non-Productive Time
The legislation states what constitutes other compensable
nonproductive time and allows for reasonable time estimates
where such time cannot be measured precisely. Nonproductive
time must be compensated at an hourly rate that is no less than
the applicable minimum wage.
Back Payments and Relief From Related Penalties and Liquidated
Damages
Covered employers will have 11 months to make back payments to
their employees for previously unpaid or underpaid rest and
recovery breaks and other nonproductive time. Employers who do
so will have a legal defense to claims for damages and other
penalties associated with the prior failure to pay what was due
for such time, going back to July 1, 2012. The major elements
of this back payment and relief plan are as follows:
Back payments are required for the time period of July
1, 2012, through December 31, 2015. Employers will have
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two options for calculating these payments - either use
time records to calculate and pay the amounts actually due
plus statutory interest or pay a percentage of gross
earnings for the same time period, with credits allowed to
employers who started paying piece-rate workers separately
for breaks and other nonproductive time after the Gonzalez
and Bluford decisions.
Employers must notify the Department of Industrial
Relations by July 1, 2016, of their election to make the
back payments and make the required back payments by no
later than December 16, 2016. Payments for employees who
cannot be located must be made to the Labor Commissioner
for deposit in the Unpaid Wage Fund.
Employers will be required to maintain and provide
appropriate documentation of the payments.
Employers who make the required back payments will have
an affirmative legal defense against any claim for damages
or penalties based on the failure to separately compensate
piece-rate workers for rest and recovery breaks and other
nonproductive time prior to the effective date of the
legislation (January 1, 2016).
The statute of limitations for these claims will be
tolled during the notice and payment periods. Certain
claims will be excluded altogether, including claims
resolved by final order or judgment, claims asserted in
litigation prior to specified dates, and new claims arising
after the law goes into effect.
The back payment and penalty relief provisions will
sunset after all time limits have run.
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
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requirements, and therefore loses access to the safe harbor.
Exclusions From the Affirmative Defense and Related Provisions
This bill provides that the affirmative defense and related
provisions shall not apply to any of the following:
Damages and penalties previously awarded in an order or
judgment that was filed and not subject to further appeal
as of January 1, 2016.
Claims based on the failure to provide paid rest or
recovery periods or pay for other nonproductive time for
which all of the following are true:
o The claim was asserted in a court pleading
filed prior to March 1, 2014, or was asserted in an
amendment to a claim that relates back to a court
pleading filed prior to March 1, 2014, and the
amendment or permission for amendment was filed prior
to July 1, 2015.
o The claim was asserted against a defendant
named with specificity and joined as a defendant, as
specified.
Claims that employees were not advised of their right to
take rest or recovery periods that rest and recovery
periods were not made available, or that employees were
discouraged or otherwise prevented from taking such breaks.
Claims for unpaid wages, damages, and penalties that
accrue after January 1, 2016.
Claims for paid rest or recovery periods or pay for
other nonproductive time that were made in any case filed
prior to April 1, 2015, when the case contained by that
date an allegation that the employer has intentionally
stolen, diminished, or otherwise deprived employees of
wages through the use of fictitious worker names or names
of workers that were not actually working.
An employer that is a new motor vehicle dealer.
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ARGUMENTS IN SUPPORT:
Supporters argue that this bill addresses a historically vexing
challenge of calculating appropriate piece rate compensation,
yet balances the needs of workers and employers. Specifically,
supporters note that this bill 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. Supporters also note that this bill provides an
affirmative defense for employers, but only if they
retroactively compensate employees for their rest periods,
recovery periods, and nonproductive time. Supporters argue that
this bill 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 argue that although this bill would allow employers to
come into compliance and avoid continued exposure for unpaid
wage claims, it contains troubling provisions that unfairly
exclude participation by some agricultural employers. Opponents
argue that these arbitrary provisions set forth a troubling
precedent that represents political targeting that sacrifices
some companies to continued legal exposure in exchange for legal
protections afforded to others. In particular, opponents argue
that these provisions are an attempt to single out two
agricultural employers for retribution, by leaving them exposed
to multi-million dollar damage claims and penalties, while
eliminating similar liability threats faced by dozens of other
similarly-situated growers. Opponents state that, whatever the
intent behind these changes, the result in unfair and
unconstitutional.
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REGISTERED SUPPORT / OPPOSITION:
Support
California Conference of Machinists
California Labor and Workforce Development Agency
California Labor Federation, AFL-CIO
California Teamsters Public Affairs Council
California Trucking Association
Driscoll Strawberry Associates, Inc.
Grimmway Enterprises, Inc.
Maricopa Orchards LLC
Monterey County Farm Bureau
Santa Cruz County Farm Bureau
Taylor Farms
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The Wonderful Company
Support if Amended
California Employment Law Council
Western Growers Association
Opposition
California Citrus Mutual
California Cotton Ginners Association
California Cotton Growers Association
California Employment Law Council
California Fresh Fruit Association
California Grain and Feed Association
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California Pear Growers Association
California Tomato Growers Association
Fowler Packing Company
Gerawan Farming, Inc.
Nisei Farmers League
Western Agricultural Processors Association
Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091