BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 588 (De León) - Employment: nonpayment of wages: Labor
Commissioner: judgment enforcement
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|Version: April 30, 2015 |Policy Vote: JUD. 4 - 1, L. & |
| | I.R. 4 - 1 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 11, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 588, upon a judgment against an employer, would
allow the Labor Commissioner to file a lien or levy on an
employer's property in order to assist an employee in collecting
unpaid wages. Specifically, this bill would authorize the Labor
Commissioner to (1) levy upon the employer's bank accounts,
accounts receivable, and real and personal property, as
specified, (2) provide for third-party claims to the property,
(3) specify due process notice, hearing, and appeals
requirements, (4) authorize a stop order to issue against the
employer, and (5) prohibit the continuation of business until
the employer posts a bond, as specified.
Fiscal
Impact:
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The Department of Industrial Relations (DIR) indicates
that it would incur first-year costs of $2.6 million
(special fund) to implement the provisions of the bill.
Ongoing costs would total $2.2 million. Note: subject to
change by hearing time.
Unknown, potentially significant court costs associated
with additional proceedings regarding wage claims.
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. Under current law, when an employer fails to pay wages
due, the employee has the right to file a claim against the
employer with DIR's Division of Labor Standards Enforcement
(DLSE), which is directed by the Labor Commissioner. After
conducting an investigation, the Labor Commissioner may hold an
administrative conference or hearing, or both. If a party is
dissatisfied with the Commissioner's decision, it can appeal to
the appropriate civil court. When a worker wins a favorable
decision, the process of collecting the award can be difficult
and ineffective. Some employers may have already hidden their
cash assets, declared bankruptcy, or otherwise become
judgment-proof.
In 2008, the Ford Foundation sponsored a survey of 4,387 workers
in low-wage industries Chicago, Los Angeles and New York City.
The survey found that 26 percent of workers in the sample were
paid less than the legally required minimum wage the prior work
week, and 60 percent of these workers were underpaid by more
than $1 per hour. In addition, 76 percent of the respondents
who worked overtime in the previous week were not paid the
legally required overtime rate by their employers.
The study also notes that minimum wage violation rates varied
widely by industry. For example, some industries, such as
apparel and textile manufacturing and personal and repair
services have minimum wage violation rates that exceed 40
percent, while others, including restaurants, and retail and
grocery stores, have rates of 20 to 25 percent. The study found
that undocumented immigrant women were at the greatest risk of
minimum wage violations. Overall, it estimated that the workers
SB 588 (De León) Page 2 of
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in low-wage industries Chicago, Los Angeles, and New York City
lose more than $56 million per week due to labor law violations.
A subsequent 2014 study by UCLA researchers utilized the data
from the 2008 survey, but focused specifically on Los Angeles
County. This study focused on survey results of 1,815 workers
in Los Angeles County, and found results similar to the national
survey: nearly 30 percent of the workers sampled were paid less
than the minimum wage in the prior work week, and 63 percent of
these workers were underpaid by more than $1 per hour. Based on
a full-year work schedule, Los Angeles County survey respondents
lost an average of $2,070 annually out of total earnings of
$16,536. The study estimated that workers in low-wage industries
in Los Angeles County lose more than $26 million per week as a
result of employment and labor law violations.
The California Constitution gives "mechanics, persons furnishing
materials, artisans, and laborers of every class the right to
file a lien upon the property upon which they have bestowed
labor or furnished material for the value of such labor and
material." The state constitution further requires the
Legislature to provide, by law, for the speedy and efficient
enforcement of such liens. The Civil Code sets forth the
obligations, rights, and remedies of those involved in a
construction project. This lien is generally only available to
construction workers (and a few others specially provided for by
statute) and only allows the worker to place a lien on the
property upon which labor was bestowed. An employee who
performed labor that did not entail construction or making an
improvement to real property - such as service work, for example
- cannot make use of a mechanic's lien.
Proposed Law:
This bill would authorize the Labor Commissioner to file a lien
on all property of the employer in California for the full
amount of any wages and other compensation, penalties, and
interest owed to the employee. Specifically, this bill would,
among other things, do the following:
Allow the Labor Commissioner, after a judgment is
SB 588 (De León) Page 3 of
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entered in favor of either the Labor Commissioner or the
employee, to collect (with the worker's consent) any
outstanding amount of the judgment by mailing a notice of
levy, as specified.
Provide that, any person, upon whom a levy has been
noticed for either possessing or owing credits, money, or
property belonging to the judgment shall surrender the
credits, money, or property to the Commissioner or pay to
the Commissioner the amount of any debt owing the judgment
debtor within 10 days of service of the levy. This includes
property, money or credits coming into the person's
possession within one year of receipt of the notice of
levy.
Provide that any person who complies with the notice of
Levy from the Labor Commissioner shall be discharged from
any obligation or liability to the judgment debtor to the
extent of the amount paid to the commissioner.
Provide that any person who fails or refuses to
surrender any credits, money, or property or pay any debts
owing to the judgment debtor shall be liable in his or her
own person or estate to the Commissioner in an amount equal
to the levy.
Provide a process for filing a levy with a bank or other
financial institution, as defined under federal law.
Limit the above-discussed provisions to property that is
not real property.
With respect to surety bond requirements, this bill would do the
following:
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Require that, if a final judgment against an employer
arising from the employer's nonpayment of wages for work
performed in the State remains unsatisfied after a period
of 10 days after the time to appeal therefrom has expired,
the employer must cease business operations unless the
employer has obtained a surety bond of $150,000. The bond
must be filed with the Labor Commissioner, as specified.
Allow, as an alternative, the employer to provide the
Labor Commissioner with a notarized copy of an accord
reached with an individual holding an unsatisfied final
judgment instead of filing a surety bond described above.
Provide that a subsequent employer similar in operation
and ownership to an employer with an unsatisfied final
judgment for unpaid wages shall be deemed the same employer
if specified criteria are met.
Require that any employer, or other person acting on
behalf of an employer, that conducts business in violation
section shall be subject to a civil fine $2,500 and that
any employer that has previously paid a fine pursuant to
this section shall be subject to an additional fine of one
hundred dollars ($100) for each calendar day that the
employer conducts business in violation of this section,
capped at $100,000.
Exempt employers from the requirements of the bond if
they employ workers who are covered by a bona fide
collective bargaining agreement that expressly provides for
wages, hours of work, working conditions, includes a
process to resolve disputes concerning nonpayment of wages,
and contains a waiver of the bond.
Provide notice requirements to the Labor Commissioner in
the event of the surety bond being cancelled or terminated.
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This bill would provide the following in the event of an
employer failing to comply with the bond provisions listed
above:
A stop order prohibiting the use of employee labor by
that employer or use of subcontracted labor until the
employer complies with bonding requirements. The stop order
must become effective immediately, and the employer must
pay any worker for their lost time due to the stop order,
not exceeding 10 days.
A lien on the real property and personal property of an
employer that for the full amount of any wages, interest,
penalties, and attorney's fees claimed to be owed to any
employee. This lien would be filed by the Labor
Commissioner. Unless the lien is satisfied or released, the
lien must continue until 10 years from the date of its
creation.
This bill would create notice and filing requirements for the
lien provisions discussed above, as well as give the Labor
Commissioner the ability to foreclose on the property.
This bill would prohibit the Department of Public Health or the
Department of Social Services from allowing a long-term care
industry from obtaining or renewing a license if the employer is
conducting business of the surety bond requirement, as
specified.
This bill would hold individual, partnership, corporation,
limited liability company, joint venture, or association jointly
and severally liable for liens against real property if the
entity provides janitorial, security guard, valet parking,
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landscaping, gardening services, and long-term care and has been
named a defendant and to the extent that the amounts are for
services performed under that contract. Additionally, this bill
creates a notice requirement for contractors of janitorial,
security guard, valet parking, landscaping, gardening services,
and long-term care if there are outstanding wage violations for
prospective contracts, but also states that the employer to
provide such notices shall not be a defense to the joint and
several liability as described above.
This bill would provide for the Labor Commissioner to hear
complaints against a person acting on behalf of an employer who
violates, or causes to be violated, any provision regulating
hours and days of work in either statute or regulation, and
would also make a person acting on behalf of an employer liable
for willfully failing to pay wages, provide a paystub, unpaid
minimum wages or overtime, and failing to indemnifying an
employee.
Finally, this bill would also create enforcement provisions for
liens and levies discussed above within the Code of Civil
Procedure. These provisions would bestow jurisdiction on the
superior court and detail the service and hearing requirements
for levies and liens filed by the Labor Commissioner.
Related
Legislation: AB 2416 (Stone) allowed an employee request that
the Labor Commissioner files a pre-judgment lien on an
employer's real, personal property, or on the real property
where a contracted employee conducted work, in order to assist
the employee in collecting unpaid wages. AB 2416 failed passage
on the Senate Floor.
Staff
Comments: The Labor Commissioner receives roughly 36,000 wage
claims annually, about 8,000 of which complete the process and
reach the Order, Decision or Award (ODA) stage. Of the latter
amount, about 6,500 claims are found in favor of the wage
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claimant. If an ODA is issued in favor of an employee, the
employer must either (1) comply with the ODA and pay back wages
(and any applicable interest and penalties) within 10 days, or
(2) appeal the decision in civil court. If an employer does not
do either, the award is then turned into a judgment.
AB 1386 (Committee on Labor and Employment) was enacted in 2013,
and permits the Labor Commissioner to place a lien on an
employer's property within the State after a final order has
been issued. This bill would go beyond the scope of AB 1386 such
that the Commissioner's Office would incur additional workload
resulting from (1) the utilization of the levy process as a
supplemental option beyond placing liens, and (2) duties related
to the surety bonds and the stop order process. DIR
preliminarily anticipates the additional workload would result
in first-years costs of $2.6 million, with $2.2 million ongoing
annually.
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