BILL ANALYSIS Ó AB 1513 Page 1 (Without Reference to File) CONCURRENCE IN SENATE AMENDMENTS AB 1513 (Williams) As Amended September 9, 2015 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | 79-0 | (April 16, |SENATE: | | (September 11, | | | |2015) | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- (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. AB 1513 Page 2 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. AB 1513 Page 3 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 AB 1513 Page 4 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. AB 1513 Page 5 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. AB 1513 Page 6 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 AB 1513 Page 7 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 AB 1513 Page 8 ("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. AB 1513 Page 9 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 AB 1513 Page 10 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