BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015 - 2016 Regular Session
SB 588 (De León)
Version: April 20, 2015
Hearing Date: April 28, 2015
Fiscal: Yes
Urgency: No
TMW
SUBJECT
Employment: nonpayment of wages: Labor Commissioner: judgment
enforcement
DESCRIPTION
This bill would establish procedures through which the Labor
Commissioner could enforce judgments against employers who fail
to satisfy a final judgment relating to the nonpayment of wages
to employees. This bill would authorize the Labor Commissioner
to levy upon the employer's bank accounts, accounts receivable,
and real and personal property, as specified, provide for
third-party claims to the property, specify due process notice,
hearing, and appeals requirements, authorize a stop order to
issue against the employer, and prohibit the continuation of
business until the employer posts a bond, as specified.
This bill would also prohibit renewal of the license of a
long-term care facility that fails to satisfy the judgment after
the time to appeal has expired. This bill would make entities
contracting with the employer for property services (janitorial,
security guard, valet parking, landscaping, and gardening) and
long-term care facility industries jointly and severally liable
for the unpaid judgment, as specified.
BACKGROUND
Wage theft is a term used to describe labor law violations such
as not paying an employee minimum wages or overtime, not paying
for off-the-clock work, tip stealing, and not paying final
wages. As the author of this bill reports, wage theft is on the
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rise and California workers are not being paid money earned.
Several high profile wage theft cases have been reported in
recent years. In February 2009, the Los Angeles City Attorney
filed criminal charges against two car wash owners for failing
to pay 250 workers the minimum wage and for denying them legally
required meal and rest breaks. The filing alleged that, in
violation of minimum wage laws, workers were paid a flat rate of
$35.00 to $40.00 a day for shifts of more than eight hours, that
their lunch breaks were as little as fifteen minutes a day, they
received no pay for overtime work, and no medical care was
provided for lacerations and acid burns caused by the machinery
and chemicals they used on the job. The owners were charged
with failing to pay a total of $450,000 in back wages over five
years. (Cathcart, Carwashes Accused of Labor Violations (Feb.
11, 2009) New York Times
[as of
Apr. 24, 2015].)
A similar lawsuit against a builder employing residential
construction workers in California, Nevada, and Arizona alleged
that the company failed to pay employees for hours they worked,
did not pay legally required overtime or provide breaks, and
kept workers off the clock while they traveled between job sites
and awaited materials. The suit was settled in October 2009,
providing over $242,000 in unpaid wages to 85 workers.
(McDonnell, Builder to Settle with 85 Workers in Overtime Case
(Oct. 13, 2009) Los Angeles Times
[as of Apr. 24, 2015].)
The problem is not limited to small businesses like car washes
or garment subcontractors. In 2008, Wal-Mart announced a
settlement of 63 cases in 42 states, which involved charges that
the company had forced employees to work off the clock without
pay after their official shifts ended. The settlement totaled
$352 million in unpaid wages and involved hundreds of thousands
of current and former Wal-Mart hourly employees across the
country. In California, a jury ordered Wal-Mart to pay $172
million for making employees miss meal breaks. (Associated
Press, Wal-Mart Settles Workers' Suit for $54.25M (Dec. 9, 2008)
CBS News [as of Apr.
24, 2015].)
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A recent University of California Los Angeles (UCLA) study found
that an estimated 654,914 workers in L.A. County suffer at least
one pay-based violation every week. Front-line workers in
low-wage industries lose more than $26.2 million per week as a
result of employment and labor law violations. The study noted
the societal ills of wage theft in that "[w]age theft not only
depresses the already meager earnings of low-wage workers, it
also adversely impacts their communities and the local economies
of which they are a part. Low-income families spend the bulk of
their earnings on basic necessities like food, clothing, and
housing. Their expenditures circulate through local economies,
supporting businesses and jobs. Wage theft robs local
communities of this spending and ultimately limits economic
growth." (Milkman, González, Narro, Wage Theft and Workplace
Violations in Los Angeles, The Failure of Employment and Labor
Law for Low-Wage Workers (2010) Institute for Research on Labor
and Employment, University of California, Los Angeles, p. 58.)
Further, only 17 percent of California workers who succeed in a
wage claim filed with the California Division of Labor Standards
Enforcement were able to recover any payment, leaving 83 percent
of wage claimants unpaid. (National Employment Law Project and
UCLA Labor Center, Hollow Victories, the Crisis in Collecting
Unpaid Wages for California's Workers (June 27, 2013)
[as of
Apr. 24, 2015] p. 2.)
In December 2014, the United States Department of Labor reported
that California had an estimated 372,000 minimum wage violations
each week, which were associated with $22.5 million in weekly
lost income or 49.3 percent of the earned income of the workers
experiencing the violations. (U.S. Dept. of Labor, The Social
and Economic Effects of Wage Violations: Estimates For
California and New York (Dec. 2014) [as of Apr. 24, 2015] p. ES-2.)
To address the significant wage theft issues in New York, that
state enacted, as of February 27, 2015, the Wage Theft
Prevention Act, which served as the model to this bill. Recent
California legislation has attempted to address the wage theft
problem. AB 2416 (Stone, 2014) would have enacted the
California Wage Theft Recovery Act to allow an employee to place
a lien on the employer's real and personal property at the time
of filing a complaint for wages and prior to judgment. AB 2416
died on the Senate Floor Third Reading File. AB 2416 was
substantially similar to AB 1164 (Lowenthal, 2013), which died
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on the Assembly Floor Inactive File.
This bill seeks to address wage theft by authorizing the Labor
Commissioner to enforce judgments, as specified, against an
employer arising from the employer's nonpayment of wages for
work performed in this state.
If this bill is approved by this Committee, it will be referred
to the Senate Committee on Labor and Industrial Relations.
CHANGES TO EXISTING LAW
Existing law requires the Labor Commissioner and his or her
deputies and representatives authorized by him or her in
writing, upon the filing of a claim by an employee, or an
employee representative authorized in writing by an employee,
with the Labor Commissioner, to take assignments of, among other
things, wage claims and incidental expense accounts and advances
and mechanics and other liens of employees. (Lab. Code Sec.
96.)
Existing law authorizes the Labor Commissioner, after
investigation and upon determination that wages or monetary
benefits are due and unpaid to any worker in the State of
California, to collect such wages or benefits on behalf of the
worker without assignment of such wages or benefits to the Labor
Commissioner. (Lab. Code Sec. 96.7.)
Existing law authorizes the Labor Commissioner to investigate
employee complaints and provide for a hearing in any action to
recover wages, penalties, and other demands for compensation,
including liquidated damages if the complaint alleges payment of
a wage less than the minimum wage fixed by an order of the
Industrial Welfare Commission or by statute, and requires the
Labor Commissioner to determine all matters arising under his or
her jurisdiction. (Lab. Code Sec. 98.)
Existing law authorizes the Labor Commissioner to prosecute all
actions for the collection of wages, penalties, and demands of
persons who are financially unable to hire counsel and the Labor
Commissioner believes have claims which are valid and
enforceable. (Lab. Code Sec. 98.3.)
Existing law provides working hour regulations and protections
against the underpayment of wages, and prescribes civil
penalties against any employer or other person acting on behalf
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of an employer for working hour and underpayment violations.
(Lab. Code Sec. 500 et seq.)
Existing law provides that, within 10 days after service of
notice of an order, decision, or award, the parties to an action
to recover wages, penalties, and other demands for compensation
may seek review of the order, decision, or award by filing an
appeal to the superior court. (Lab. Code Sec. 98.2(a).) As a
condition to filing an appeal, existing law requires the
employer to first post an appeal bond or cash deposit with the
court in the amount of the order, decision, or award. (Lab.
Code Sec. 98.2(b).)
Existing law provides that if an employer has been convicted of
a wage violation, or if any judgment against an employer for
nonpayment of wages remains unsatisfied for a period of 10 days
after the time to appeal therefrom has expired, and no appeal
therefrom is then pending, the Labor Commissioner may require
the employer to deposit a bond in such sum as the Labor
Commissioner may deem sufficient and adequate in the
circumstances, to be approved by the Labor Commissioner. (Lab.
Code Sec. 240(a).)
Existing law requires the Labor Commissioner to make every
reasonable effort to ensure that judgments are satisfied,
including taking all appropriate legal action, and requiring the
employer to deposit a bond, as specified. (Lab. Code Sec.
98.2(j).)
Existing law , as an alternative to a judgment lien, authorizes
the Labor Commissioner to record a certificate of lien on the
employer's real property for amounts due to the employee under
the final order, which establishes a claim of an interest in the
property that continues for 10 years unless the lien is
satisfied or released. (Lab. Code Sec. 98.2(g).)
Existing law provides that the judgment creditor, or the Labor
Commissioner as assignee of the judgment creditor, is entitled
to court costs and reasonable attorney's fees for enforcing the
judgment. (Lab. Code Sec. 98.2(k).)
Existing law provides various creditor's remedies for the
enforcement of money judgments. (Code Civ. Proc. Sec. 708.010
et seq.)
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Existing law provides that, except as otherwise provided by law,
all property of the judgment debtor is subject to enforcement of
a money judgment. (Code Civ. Proc. Sec. 695.010(a).)
Existing law authorizes a judgment debtor to claim specified
property as exempt from enforcement of a money judgment. (Code
Civ. Proc. Sec. 703.010 et seq.)
Existing law provides procedures for levy (seizure) of a
judgment debtor's property in order satisfy a judgment. (Code
Civ. Proc. Sec. 699.010 et seq.)
Existing law authorizes a judgment creditor to garnish the
judgment debtor's wages (require the judgment debtor's employer
to hold back money from being paid to the debtor in order to
give that money to the judgment creditor). (Code Civ. Proc.
Sec. 706.010 et seq.)
Existing law authorizes a judgment creditor to levy accounts
receivable and money from a judgment debtor's deposit accounts
to satisfy the judgment. (Code Civ. Proc. Secs. 700.140,
700.170.)
Existing law authorizes a third person claiming ownership or the
right to possession of a judgment debtor's property to make a
third-party claim if the interest claimed is superior to the
judgment creditor's lien on the property. (Code Civ. Proc. Sec.
720.010.)
This bill would authorize the Labor Commissioner to provide for
a hearing against any employer or other person acting on behalf
of an employer for a violation involving underpayment of wages.
This bill , after a judgment is entered by a court of competent
jurisdiction in favor of the Labor Commissioner or in favor of
any employee as specified, would authorize the Labor
Commissioner to, with the consent of any employee in whose favor
the judgment is entered, collect any outstanding amount of the
judgment by mailing a notice of levy upon all persons having in
their possession, or who will have in their possession or under
their control, any credits, money, or property, other than the
debtor's interest in real property, belonging to the judgment
debtor, or who owe any debt to the judgment debtor at the time
they receive the notice of levy.
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This bill would authorize the Labor Commissioner to execute a
levy on any bank account or account receivable, as specified, by
mailing a notice of levy to the person against whom the levy is
directed and serving a copy on the judgment debtor, and would
require the notice of levy to contain all of the information
required to be included in a writ of execution in a notice of
levy.
This bill would require any person, upon whom a levy has been
noticed having in his or her possession or under his or her
control any credits, money, or property belonging to the
judgment debtor or owing any debts to the judgment debtor at the
time of receipt of the levy or coming into his or her possession
or under his or her control within one year of receipt of the
notice of levy, to surrender the credits, money, or property to
the Labor Commissioner or pay to the Labor Commissioner the
amount of any debt owing to the judgment debtor within 10 days
of service of the levy, and surrender the credits or property,
or the amount of any debt owing to the judgment debtor coming
into his or her own possession or control within one year of
receipt of the notice of levy within 10 days of the date of
coming into possession or control of the credits or property or
the amount of any debt owing to the judgment debtor.
This bill would provide that any person who surrenders to the
Labor Commissioner any credits, money, or property, or pays the
debts owing to the judgment debtor, shall be discharged from any
obligation or liability to the judgment debtor to the extent of
the amount paid to the Labor Commissioner as a result of the
levy.
This bill would provide that if the levy is made on a deposit or
credits, money, or property in the possession or under the
control of a bank, savings and loan association, or other
financial institution, as defined, the notice of levy may be
delivered or mailed to a centralized location designated by the
bank, savings and loan association, or other financial
institution, as specified.
This bill would require any person who is noticed with a levy
and who fails or refuses to surrender any credits, money, or
property or pay any debts owing to the judgment debtor to be
liable in his or her own person or estate to the Labor
Commissioner in an amount equal to the value of the credits,
money, or other property or in the amount of the levy, up to the
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amount specified in the levy.
This bill would provide that the fees, commissions, expenses,
and the reasonable costs associated with the sale of property
levied upon by warrant or levy, including, but not limited to,
appraisers' fees, auctioneers' fees, and advertising fees are an
obligation of the judgment debtor and may be collected from the
judgment debtor by virtue of the warrant or levy or in any other
manner as though these items were part of the judgment or award
outstanding.
This bill would provide that whenever a warrant or notice of
levy may properly be issued by the Labor Commissioner, and the
warrant may be levied with the same effect as a levy pursuant to
a writ of execution, the Labor Commissioner may use any of the
remedies available to a judgment creditor.
This bill , with respect to the following provisions regarding
the employer's business, would assign jurisdiction over
enforcement of creditor remedies to the superior court in the
county where the employee resides, in the county where the
judgment debtor resides, or in the county where the person
against whom the levy or warrant was issued resides.
This bill , whenever the Labor Commissioner levies upon property
pursuant to a warrant or notice of levy for the collection of an
unsatisfied judgment or award, would authorize the debtor, who
is a natural person, to claim the same exemptions to which a
judgment debtor is entitled, and made, heard, and determined in
the same manner as if the property were levied upon under a writ
of execution, and made, heard, and determined in the same manner
as if the property were levied upon under a writ of execution.
This bill would require a judgment debtor's claim of exemption
or a third-party claim to be filed with the Labor Commissioner,
and be heard and determined in a superior court.
This bill , in the case of a writ of execution issued by a court
of competent jurisdiction, would authorize the Labor
Commissioner, when collecting an unsatisfied judgment or award,
to perform the duties of the levying officer, except that the
Labor Commissioner need not give himself or herself the notices
that the levying officer is required to serve on a judgment
creditor or the notices that a judgment creditor is required to
give to the levying officer.
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This bill , if the levy is for a deposit, credits, money, or
property in the possession or under the control of a bank or
savings and loan association or for an account receivable or
other general intangible owed to the judgment debtor by an
account debtor, would allow the Labor Commissioner to deliver or
mail a notice of levy to a centralized location designated by
the bank or savings and loan association or, in the case of an
account receivable or other general intangible, to the agent for
service of process of the account debtor.
This bill , if the notice of levy is received at the designated
central location for the bank or savings and loan association,
would provide that the notice of levy would apply to all
deposits, credits, money, and personal property held by the bank
or savings and loan association regardless of the location of
that property.
This bill would allow the Labor Commissioner to issue the notice
of levy, whether or not a court has issued a writ of execution,
and require the notice of levy to contain all of the information
required to be included in a writ of execution and in a notice
of levy.
This bill , if a final judgment or final arbitration award, as
specified, against an employer arising from the employer's
nonpayment of wages for work performed in this state remains
unsatisfied after a period of 10 days after the time to appeal
therefrom has expired and no appeal therefrom is pending, would
prohibit the employer from continuing to conduct business in
this state related to that final judgment unless the employer
has obtained a bond, in the principal sum of not less than
$150,000, from a surety company admitted to do business in this
state and has filed a copy of that bond with the Labor
Commissioner.
This bill , in lieu of filing and maintaining the bond, would
allow the employer to provide the Labor Commissioner with a
notarized copy of an accord reached with an individual holding
an unsatisfied final judgment.
This bill would require the bond to be issued in favor of, and
payable to, the people of the State of California, and for the
benefit of any employee damaged by his or her employer's failure
to pay wages, including any interest, penalties, and attorney's
fees.
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This bill would not require a bond in favor of employees covered
by a bona fide collective bargaining agreement, if the agreement
expressly provides for wages, hours of work, working conditions,
a process to resolve disputes concerning nonpayment of wages,
and a waiver of the bond. This bill would also specify
cancellation or termination requirements for the bond.
This bill , subject to written notice to a subsequent employer
about any unsatisfied judgments against the employer for
nonpayment of wages, would deem a subsequent employer similar in
operation and ownership to an employer with an unsatisfied final
judgment for unpaid wages to be the same employer and subject to
bond requirements if (1) the employees of the subsequent
employer are engaged in substantially the same work in
substantially the same working conditions under substantially
the same supervisors or (2) if the new entity has substantially
the same production process or operations, produces
substantially the same products or offers substantially the same
services, and has substantially the same body of customers.
This bill would authorize civil fines against any employer, or
other person acting on behalf of an employer, that conducts
business in violation of this bill.
This bill would authorize the Labor Commissioner to issue and
serve a stop order on an employer in violation of the bond
requirements and prohibit the employer's use of labor until the
employer complies with the bond requirements, provided that the
stop order would not compromise or imperil public safety or the
life, health, and care of vulnerable individuals. The stop
order would also prohibit the employer from continuing to
provide services by subcontracting for labor and would become
effective immediately upon the service of the order. The bill
would require the employer to pay any employee affected by the
work stoppage for such time lost, not exceeding 10 days, pending
compliance by the employer.
This bill would authorize the employer to protest the stop order
by making and filing with the Labor Commissioner a written
request for a hearing within 20 days after service of the stop
order. This bill would require the hearing to be held within 5
days from the date of filing the request, and require the Labor
Commissioner to notify the employer of the time and place of the
hearing by mail. This bill would require the stop order to be
immediately affirmed or dismissed at the conclusion of the
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hearing, and within 24 hours thereafter, the Labor Commissioner
would be required to issue and serve on all parties to the
hearing by registered or certified mail a written notice of
findings, accompanied by written findings. This bill would
authorize a writ of mandate to be taken from the findings to the
appropriate superior court, and require the writ to be taken
within 45 days after the mailing of the notice of findings.
This bill would provide criminal penalties for stop order
violations and authorize the Labor Commissioner to obtain
injunctive and other relief from the courts.
This bill would authorize the Labor Commissioner to create a
lien, as specified, on any real property in California of an
employer that is conducting business in violation of this bill's
bonding requirements for the full amount of any wages, interest,
penalties, and attorney's fees claimed to be owed to any
employee.
This bill would require the Labor Commissioner to issue a
certificate of release, releasing the lien, upon final
satisfaction of any judgment entered in favor of the employee,
upon adjudication of the claim in favor of the employer, upon
the filing of a surety bond, and the certificate of release may
be recorded by the employer at the employer's expense.
This bill , unless the lien is satisfied or released, would
require the lien to continue until 10 years from the date of its
creation.
This bill , prior to using this lien procedure, would require the
Labor Commissioner to provide at least 20 days' preliminary
notice to the employer, and require the preliminary notice to
advise the employer of the nature and amount of the employee's
claim and of the Labor Commissioner's authority to create a lien
on the employer's property to secure payment of the claim. This
bill would require the Labor Commissioner to serve the
preliminary notice on the employer by certified mail with return
receipt requested, evidenced by a certificate of mailing,
postage prepaid, addressed to the employer at the employer's
residence or place of business, with a copy of any notice of
lien on the employer to be served in the same manner.
This bill , upon entry of a final order, decision, or award
issued in an appeal against the employer for unpaid wages, or
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entry of a final judgment against the employer for unpaid wages
in an action filed in the superior court, would authorize the
Labor Commissioner to bring an action to foreclose on any lien,
and this lien right would be in addition to any other lien
rights available to an employee or to the Labor Commissioner
without limiting those rights.
This bill would authorize the Labor Commissioner to create a
lien on any personal property in California of an employer that
conducts business in violation of this bill's bonding
requirements for the full amount of any wages, interest,
penalties, and attorney's fees claimed to be owed to any
employee. This bill would authorize the Labor Commissioner to
create the lien by filing a notice of lien with the Secretary of
State on the standard form of initial financing statement, as
specified, and would require the standard form to be completed
in the following manner: (1) the Labor Commissioner shall be
identified as the secured party; (2) the employer shall be
identified as the debtor; and (3) the description of the
collateral shall include the following statements:
a statement of the Labor Commissioner's demand for payment of
the wages, penalties, interest, and attorney's fees,
specifying the amount owed to the employee, and if the amount
is estimated, providing an explanation for the basis of the
estimate; and
a general statement of the kind of work furnished by the
employee and the dates of employment.
This bill would provide that the attaches to all personal
property that is owned by the employer at the time of the filing
of the notice of lien, or that is subsequently acquired by the
employer, that can be made subject to a security interest.
This bill would require the Labor Commissioner to file a
termination statement, releasing the lien created under this
section, upon final satisfaction of any judgment entered in
favor of the employee, upon adjudication of the claim in favor
of the employer, upon the filing of a surety bond in a form
acceptable to the Labor Commissioner sufficient to secure the
claim. This bill would provide that the notice of claim of lien
would cease to be effective upon the filing of the termination
statement with the office of the Secretary of State, and would
allow a termination statement for a notice of lien to be filed
in the same manner as a termination statement for a financing
statement.
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This bill , unless the lien is satisfied or released, would
require the lien on personal property of the employer to
continue until 10 years from the date of its creation.
This bill , prior to using this lien procedure, would require the
Labor Commissioner to provide at least 20 days' preliminary
notice to the employer, and would require the preliminary notice
to advise the employer of the nature and amount of the
employee's claim and of the Labor Commissioner's authority to
create a lien on the employer's personal property to secure
payment of the claim. This bill would require the Labor
Commissioner to serve the preliminary notice on the employer by
certified mail with return receipt requested, evidenced by a
certificate of mailing, postage prepaid, addressed to the
employer at the employer's residence or place of business, with
a copy of any notice of lien on the employer to be served in the
same manner.
This bill , upon entry of a final order, decision, or award
issued in an appeal against the employer for unpaid wages, or
entry of a final judgment against the employer for unpaid wages
in an action filed in the superior court, would allow the Labor
Commissioner to bring an action to foreclose on any lien created
on the employer's personal property, and this lien right would
be in addition to any other lien rights available to an employee
or to the Labor Commissioner.
This bill would prohibit an employer in the long-term care
industry that is also required to obtain a license from the
State Department of Public Health or the State Department of
Social Services, as specified, from obtaining a license or
renewal of that license if the employer is conducting business
in violation of this bill's bonding requirements. This bill
would define "long-term care" to mean the operation of a skilled
nursing facility, intermediate care facility, congregate living
facility, hospice facility, adult residential facility,
residential care facility for persons with chronic
life-threatening illness, residential care facility for the
elderly, continuing care retirement community, home health
agency, or home care organization, as specified.
This bill would make an individual, partnership, corporation,
limited liability company, joint venture, or association that,
as part of its business, contracts with an employer to perform
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services in the property services or long-term care industries
jointly and severally liable, where the individual, partnership,
corporation, limited liability company, joint venture, or
association has been named as a defendant and provided notice of
the original hearing and complaint, with the employer for any
unpaid wages, including interest, and the employer was found
liable for those unpaid wages by an order, decision or award
issued, to the extent the amounts are for services performed
under that contract. This bill would authorize the Labor
Commissioner to determine the issue of joint and several
liability.
This bill would not apply joint and several liability to unpaid
wages owed to employees covered by a bona fide collective
bargaining agreement, if the agreement expressly provides for
wages, hours of work, working conditions, a process to resolve
disputes concerning nonpayment of wages, and a waiver of the
joint and several liability.
This bill would require an employer that contracts to provide
services in the property services or long-term care industries
shall, prior to entering into such a contract, to provide
written notice, as specified, to the other party to the
prospective contract of any unsatisfied final judgments against
the employer for nonpayment of wages. This bill would require
the employer to provide, within thirty (30) days of the entry of
the judgment, written notice of any unsatisfied final judgments
against the employer for nonpayment of wages to any parties with
which the employer is presently under contract to provide
services in the property services or long-term care industries,
and the failure of the employer to provide such notices shall
not be a defense to the joint and several liability. This bill
would define "property services" to mean janitorial, security
guard, valet parking, landscaping and gardening services.
This bill would make any person liable for any working hour or
wage underpayment violations also liable for unpaid wages,
penalties, and other compensation, as specified.
COMMENT
1. Stated need for the bill
The author writes:
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According to a 2013 study by the National Employment Law
Project and the UCLA Labor Center, it is difficult and rare
for workers in California to recover stolen wages. Even if a
worker wins their case before the California Division of Labor
Standards Enforcement (DLSE) and received a judgment, only 17
[percent] were able to collect any payment.
This is possible, because many of the businesses that are the
worst violators of our labor laws simply roll up their
operations and close shop when workers try to hold them
accountable, thus avoiding any responsibility for their
exploitative employment practices. In fact, in over 60
[percent] of the cases where DLSE found an employer owed
wages, the employer was listed as non-active, i.e., defunct.
SB 588 gives the Labor Commissioner additional tools to
collect from employers who have exhausted all appeals for
their non-payment of wages and have final judgments owed. . .
. SB 588 also gives the Labor Commissioner the authority to
hold individual business owners accountable for their debts to
workers. By applying an existing enforcement law to wage
claims, responsible individuals can be issued citations
personally. This will discourage business owners from rolling
up their operations and walking away from their debts to
workers and starting a new company.
SB 588 updates and improves collection methods by giving the
Labor Commissioner greater flexibility in choosing how to
secure the assets needed to pay the wages a business owes. In
addition SB 588 targets two high-risk sectors - property
services and long-term care - by establishing procedures to
ensure parties are held individually responsible to ensure
that employers can't evade the law through contracting and
subcontracting arrangements.
2. Expanding lien and levy authority of Labor Commissioner
Existing law authorizes the Labor Commissioner to investigate
wage complaints, prosecute those complaints, and enforce wage
judgments, which may include placing liens on an employer's
property. (Lab. Code Secs. 98, 98.2, 98.3.) This bill would
further authorize the Labor Commissioner to file liens on an
employer's real and personal property to secure an employee's
interest for amounts owed following final judgment. This bill
would also authorize the Labor Commissioner to levy the
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employer's bank accounts and accounts receivable to take
possession of deposits, credits, money, property, and money owed
to the employer in order to enforce an employee's wage judgment.
According to a recent study based on a comprehensive review of
records released by the DLSE, "[n]on-payment or underpayment of
wages . . . remains rampant nationwide. As a landmark survey of
low-wage workers found in 2008, 26 percent of low-wage workers
were paid less than the minimum wage in the prior week; 76
percent of those who worked more than 40 hours were not paid the
legally required overtime rate. . . . The inability of workers
and state authorities to enforce judgments and collect payment
from unscrupulous employers has widespread effects." (National
Employment Law Project and UCLA Labor Center, Hollow Victories:
The Crisis in Collecting Unpaid Wages for California's Workers
(June 27, 2013) [as of Apr. 24, 2015] p. 2.) This study
recommended strengthening California's wage lien provisions,
noting that "California already allows workers to file a
post-judgment lien on employer property. However, for many
workers, this is too late. A temporary pre-judgment hold would
discourage unscrupulous employers from selling, hiding, or
disposing of property while a court evaluates the wage claim or
releases the lien. An employer's business could continue to
operate while the validity of the lien is decided." (Id. at p.
19.) The study also notes that "[m]any states have wage lien
laws in some form, providing good experience and success with
this mechanism, including Georgia, Idaho, Maryland, New
Hampshire, Texas, and Wisconsin . . . where pre-judgment wage
liens are available to workers [and] 80 percent of workers are
able to recover at least some of their wages." (Id.)
The United States Department of Labor's December 2014 report
found that minimum wage violations against employees directly
impacts the poverty rate, the State's collection of payroll
taxes, and earned income tax credits. (U.S. Dept. of Labor, The
Social and Economic Effects of Wage Violations: Estimates For
California and New York (Dec. 2014)
[as of Apr. 24, 2015], p.
ES-4.) According to the report, the direct impact of minimum
wage violations resulted in 41,000 California families living
below the poverty line, $14 million in lost payroll taxes to the
State, and $4.5 million lost by employees in earned income tax
credits. (Id.)
SB 588 (De León)
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In addition to those impacts, Human Impact Partners, in support,
points out that:
Though people do not typically associate labor policies with
health, they actually impact health greatly. Human Impact
Partners has conducted extensive research on wage theft
specifically, and our findings indicate that existing laws
fail to protect workers from wage theft, which leads to
multiple adverse health impacts.
As a result of wage theft, many adults find themselves having
to work multiple jobs or additional hours to make up for lost
wages. Based on an analysis we conducted in Los Angeles, we
could expect the following impacts for the state should SB 588
pass and be properly implemented:
Income for those currently experiencing wage theft would
increase and this would result in a reduction in the
negative health impacts associated with poverty.
Children of those currently experiencing wage theft
would have better living conditions, food security, and
parental involvement in their educational development. This
would result in better developmental and physical and
mental health outcomes for those children.
The additional work time required to make up for stolen
wages would be reduced and more time would be available for
self-care, leisure, and family. The alleviation of time
poverty would reduce levels of stress and resulting
insomnia, anxiety, depression, and other mental and
socio-emotional health problems.
Low-wage workers who experience wage theft would
experience lower levels of stress as a result of not
feeling [threatened] or retaliated against for reporting
wage theft. This will leave workers feeling less helpless
and improve mental health.
In summary, our research shows that SB 588 would improve the
health and wellbeing of workers, their families, and
communities. By passing this policy out of committee, the
state has an opportunity to move towards mitigating many
health issues faced by low-wage workers who are the backbone
of our state's economy. (Emphasis in original.)
To address the inability of wage claimants to collect on
judgments and deter employers from withholding money earned by
SB 588 (De León)
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their employees, this bill would authorize the Labor
Commissioner to utilize lien and levy procedures, based on
existing lien and levy statutes for judgment creditors in civil
actions, to enforce the employee's judgment against the
employer. This bill would extend existing judgment debtor
exemptions that would allow the employer to exempt specified
property, including a homestead, from lien or levy. This bill
would also extend the existing process for a third party, who
claims an interest in the judgment debtor's property, to
establish the third party's interest in the property. It is
important to note that under existing law, an employee may
pursue a wage claim in civil court and enforce a judgment
through existing judgment creditor statutes. However, the civil
process is cost-prohibitive for most employees, who, instead,
are able to rely on the Labor Commissioner's enforcement
capabilities provided under the Labor Code. This bill would
supplement the Labor Commissioner's ability to assist these
employees. By using existing judgment creditor remedies for the
enforcement of the employee's judgment, this bill would provide
robust protections for employees harmed by wage theft.
3. Due process protections
This bill would provide due process protections for judgment
debtors through notice, hearing, and bonding requirements.
Existing law provides that, within 15 days following a hearing
and the determination that an employer is liable for wages owed
to an employee, the Labor Commissioner is required to file the
order, decision, or award, and provide notice of the order by
personal, mail, or other services, as specified, to the
employer. The employer (judgment debtor) has 10 days after
service of the order to file an appeal of the order. Pending
the appeal, the employer is required to post a bond in the
amount of the award. If the employer does not appeal the
decision, the order becomes final and the Labor Commissioner
files the final order with the superior court. By this point,
the employer is aware of its legal responsibilities to the
employee, and the bill would require additional notices to be
sent to the employer if the Labor Commissioner proceeds to
collect on the judgment through the levy or lien processes
provided in the bill. The author also notes that the levy
procedures provided in this bill are modeled on the levy
procedures provided with respect to collection by local child
support agencies of child support debt.
SB 588 (De León)
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If no appeal is filed by the employer challenging the wage award
to the employee, this bill would also provide that, when the
order is final and the judgment for nonpayment of wages remains
unsatisfied, 10 days after the time to appeal has expired, the
employer would be prohibited from conducting business in the
state unless the employer has obtained a bond in the amount of
$150,000 or reached an agreement regarding the unsatisfied
judgment with the employee. The California Rural Legal
Assistance Foundation (CRLA), in support, notes the importance
of the bond requirements in this bill as a condition to
continuing to conduct business. According to CRLA, current
surety bond amounts required of farm labor contractors "have not
been adjusted upward for more than a decade and are usually only
adequate in the smallest of wage claim cases, involving only
individual workers. . . . [In] 15 pending cases involving
multiple workers' wage claim cases, the total amount of wages
due is between $5,490,000 and $6,120,000, while the maximum
total amount of all of the 15 [farm labor contractor]
defendants' individual surety bonds is $1,125,000. For our farm
worker clients, the reality is that much of what is owed to them
will never be recoverable from the small bonds required by
California as a condition of doing business here. For them, SB
588 will be a major step forward." If the employer continues to
conduct business without satisfying the judgment or posting a
bond, the Labor Commissioner would be authorized to issue a stop
order, which would become effective immediately upon the service
of the order, provided that the stop order would not compromise
or imperil public safety or the life, health, and care of
vulnerable individuals.
It is important to note that the bill would also protect the
employees of the business required to cease operations pursuant
to the stop order because the bill would require that any
employee affected by the work stoppage to be paid by the
employer for such time lost, not exceeding 10 days, pending
compliance by the employer. The bill also provides an appeal
process for the employer regarding the stop order. Through
hearing, notice, and appeal provisions, this bill would provide
due process protections to the employer throughout the judgment
debt enforcement process.
4. Joint and several liability for property services and
long-term care industries
This bill would prohibit a long-term care industry employer from
SB 588 (De León)
Page 20 of ?
obtaining or renewing a state license if the employer had not
satisfied a wage judgment and failed to post a bond. This bill
would also make entities, who were named as defendants and
provided notice of the original hearing and complaint,
contracting for property services or long-term care services
with a judgment creditor who owes unpaid wages jointly and
severally liable for the payment of the judgment. This bill
would also make any person liable for any working hour or wage
underpayment violations also liable for unpaid wages, penalties,
and other compensation, as specified.
The author notes that the recent report from the United States
Department of Labor contained "industry specific statistics on
the prevalence of wage theft. This data showed that over 95
percent of home health care workers and 80 percent of property
services workers suffered an overtime violation in the previous
week. The report also showed that over 97 percent of home
health care workers and over 77 percent of property service
workers were forced to work off-the-clock in the previous week.
The prevalence of wage theft in these industries warrants
enhanced safeguards in these industries." (See also National
Employment Law Project and UCLA Labor Center, Hollow Victories,
the Crisis in Collecting Unpaid Wages for California's Workers
(June 27, 2013)
[as of
Apr. 24, 2015] p. 2.).)
A review by the Department of Labor Standards Enforcement (DLSE)
of 1,433 unpaid wage cases revealed that, in 60 percent of those
cases, by the time judgment was entered against the employer,
the employer was found to be a non-active business entity, and,
on average, employers who ceased operations did so within 7.7
months of a wage claim being filed. (National Employment Law
Project and UCLA Labor Center, Hollow Victories, the Crisis in
Collecting Unpaid Wages for California's Workers (June 27, 2013)
[as of
Apr. 24, 2015] p. 11.) When the employer closes its doors, the
employee may be unable to locate the employer, which prevents
wage judgment collection. According to a recent news article,
"[s]ome businesses ignore the penalties and the judgments, shut
their doors and reopen under a different name or file for
bankruptcy, leaving the workers high and dry." (S. Stock, J.
Putnam, F. Escamilla, California's wage theft problem, NBC Bay
Area (Feb. 13, 2015)
SB 588 (De León)
Page 21 of ?
[as of Apr. 25, 2015].)
According to the author, enforcement of existing wage laws "is
made more difficult because so much of the low-wage sector is
now structured using layers of contractors and subcontractors,
allowing the actual employers of record and beneficiaries of the
work provided [] to avoid legal responsibility. These employers
who cheat their workers out of their hard-earned wages are
essentially thieves. But due to systematic schemes designed to
skirt existing laws, these 'bad actor' employers are allowed to
get away with it."
To better protect low-wage workers, this bill would target two
high-risk sectors to ensure those parties do not evade payment
of wage judgments through contracting and subcontracting
arrangements.
5. Attorneys' fees
Existing law provides that the judgment creditor, or the Labor
Commissioner as assignee of the judgment creditor, is entitled
to court costs and reasonable attorney's fees for enforcing the
judgment. (Lab. Code Sec. 98.2(k).) This bill would continue
the existing ability of the judgment creditor, or the Labor
Commissioner as assignee, to receive attorney's fees and costs
for collection of the judgment through the real or personal
property lien process.
This bill would also provide for collection from the judgment
debtor for fees, commissions, expenses, and reasonable costs
associated with the sale of property levied by the Labor
Commissioner, including appraiser's fees, auctioneer's fees, and
advertising fees. This provision builds on the existing ability
of a judgment creditor to levy personal property and receive
attorney's fees and costs associated with additional attempts to
collect the property. (See Code Civ. Proc. Sec. 699.030.)
6. Author's amendments
The author offers the following technical and clarifying
amendments:
Author's amendments :
1. Strike and replace nine references to "commissioner"
SB 588 (De León)
Page 22 of ?
with "Labor Commissioner"
2. On page 6, in lines 16, remove "it" and insert "the
notice of levy"
3. On page 7, in line 6, after "judgment" insert "debtor"
4. On page 7, in line 11, strike "owing" and insert "owed
to"
5. On page 7, in line 17, strike "owing" and insert "owed"
6. On page 7, in line 20, strike "owing" and insert "owed
to"
7. On page 7, in line 33, strike "owing" and insert "owed"
8. On page 10, in line 23, strike "related to that final
judgment"
9. On page 11, in lines 14 through 16, delete "Subject to
written notice to a subsequent employer about any
unsatisfied judgments against the employer for nonpayment
of wages, a subsequent" and insert "An"
10. On page 11, in line 18, after "shall" insert ", upon
receiving written notice of the unsatisfied judgment,"
11. On page 11, in line 28, strike "fine" and insert
"penalty"
12. On page 11, in line 30, strike "fine" and insert
"penalty"
13. On page 12, in line 19, strike "and findings" and insert
", accompanied by written findings"
14. On page 15, in line 39, strike "(c)" and insert "(b) of
Section 98."
Should this bill pass out of Committee, these amendments would
be taken in the Senate Labor and Industrial Relations Committee.
7. Concerns raised
The Chamber of Commerce, California Justice Association of
California, and California Land Title Association (coalition)
have raised several concerns with the bill. First, they are
concerned that a small business may not be able to raise funds
within the 10-day time frame required to establish a $150,000
bond following the filing of the final judgment. The coalition
requests that the bill be amended to authorize the Labor
Commissioner to determine the amount of the surety bond, up to a
maximum of $150,000, and extend the 10-day time frame to 25
days. Second, the coalition states that attorney's fees are not
available in Labor Commissioner actions and request that the
provisions for attorney's fees be struck from the bill.
SB 588 (De León)
Page 23 of ?
Third, the coalition raises concern with the joint and several
liability provisions of the bill. The coalition requests that
the bill be amended to take into consideration and reconcile the
bill with the joint and several liability imposed under Labor
Code Section 2810.3, which requires a client employer, as
specified, to be civilly liable for a labor contractor's failure
to pay wages to or secure worker's compensation insurance for
workers supplied by the labor contractor.
Support : 9to5, National Association of Working Women; Alliance
of Californians for Community Empowerment Action; Alliance San
Diego; Asian Americans Advancing Justice- Los Angeles;
California Employment Lawyers Association; California Immigrant
Policy Center; California Labor Federation, AFL-CIO; California
Professional Firefighters; California Rural Legal Assistance
Foundation, Inc.; Center on Policy Initiatives; Central American
Resource Center - Los Angeles; Centro Legal de la Raza; Chinese
Progressive Association; CHIRLA-Coalition for Humane Immigrant
Rights of Los Angeles; CLEAN Car Wash Campaign; Clergy and Laity
United for Economic Justice; Coalition For A Safe Environment;
Coalition to Abolish Slavery & Trafficking; Community Action
Board of Santa Cruz County Inc.; Day Labor Center Hayward/
Oakland; Day Worker Center of Mountain View; Dignity Campaign;
Dolores Street Community Services; Employment Rights Center;
Equal Rights Advocates; Filipino Advocates for Justice; Filipino
Migrant Center; Fresno County Democrats; Garment Worker Center;
Gender Justice LA; Graton Day Labor Center; Holman United
Methodist Church; Housing Long Beach; Human Impact Partners;
InnerCity Struggle; Instituto de Educacion Popular del Sur de
California; Katharine & George Alexander Community Law Center;
Khmer Girls in Action; La Colectiva De Mujeres; Liberty Hill
Foundation; Los Angeles Alliance for a New Economy; LA Black
Worker Center; Los Angeles Fight for $15 Organizing Committee;
Maintenance Cooperation Trust Fund; Making Change at Walmart; Mi
Familia Vota; National Day Laborer Organizing Network; National
Employment Law Project; One LA-IAF; Pacoima Beautiful; Pilgrim
United Church of Christ; Pilipino Association of Workers and
Immigrants - Silicon Valley; Restaurant Opportunities Center of
Los Angeles; Sacramento Area Congregations Together; San Diego
and Imperial Counties Labor Council, AFL-CIO; San Francisco Day
Labor Program & Women's Collective, a program of Dolores Street;
Community Services; San Francisco Progressive Workers Alliance;
SoCalCosh, Southern California Coalition for Occupational Safety
and Health; Social Justice Learning Institute; Street Level
SB 588 (De León)
Page 24 of ?
Health Project; T.R.U.S.T. South LA; The Institute of Popular
Education of Southern California; The Wage Justice Center, UCLA
Labor Center; Union de Vecinos; Workplace Justice Initiative;
Worksafe, Inc.
Opposition : None Known
HISTORY
Source : Koreatown Immigrant Workers Alliance; Service Employees
International Union California; Wage Justice Center
Related Pending Legislation : None Known
Prior Legislation :
AB 2416 (Stone, 2014) See Background.
AB 1164 (Lowenthal, 2013) See Background.
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