BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1513


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          (Without Reference to File)





          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1513 (Williams)


          As Amended  September 9, 2015


          Majority vote


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          |ASSEMBLY:  | 79-0 | (April 16,    |SENATE: |      | (September 11,  |
          |           |      |2015)          |        |      |2015)            |
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                                                  (vote not available)




          Original Committee Reference:  INS.


          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.









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          The Senate amendments add provisions to this bill that do the  
          following:


          1)Change the author to Assembly Member Williams.
          2)Provide 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  
               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.










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             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.


          3)Provide 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  
            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.


          4)Provide 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  








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            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% 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.


             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.









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          5)Provide 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.
          6)Provide specified tolling provisions related to the statute of  
            limitations.


          7)Provide 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.


          8)Provide 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.








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               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.


             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.


          9)Provide 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.
          10)Provide 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.


          11)Contain a January 1, 2021, sunset date on the affirmative  
            defense and related provisions of the bill.


          FISCAL EFFECT:  Unknown









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          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  
          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  








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          ("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  
          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.


          Following these recent decisions, 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.








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          Therefore, this bill represents compromise in an attempt to  
          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.


          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.


          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  








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          similarly-situated growers.  Opponents state that, whatever the  
          intent behind these changes, the result in unfair and  
          unconstitutional.


          Analysis Prepared by:                     Ben Ebbink / L. & E. /  
          (916) 319-2091                                      FN: 0002384