BILL ANALYSIS Ó
SB 588
Page 1
Date of Hearing: July 8, 2015
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
SB
588 (De León) - As Amended July 1, 2015
SENATE VOTE: 26-13
SUBJECT: Employment: nonpayment of wages: Labor Commissioner:
judgment enforcement.
SUMMARY: Authorizes the Labor Commissioner to file a lien or
levy on an employer's property in order to assist an employee in
collecting unpaid wages where there is a judgment against the
employer, and contains related provisions. Specifically, this
bill:
1) Allows the Labor Commissioner, beginning 20 days after a
judgment is entered by a court of competent jurisdiction in
favor of the Labor Commissioner or in favor of any employee,
to 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 belonging to
the judgment debtor, or who owe any debt to the judgment
debtor at the time they receive the notice of levy. This
can only be done with the consent of the aggrieved worker.
2) Provides that, any person, upon whom a levy has been
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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 ten 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.
3) Provides 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.
4) Provides 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.
5) Provides a process for filing a levy with a bank or other
financial institution, as defined under federal law.
6) Limits the above-discussed provisions to property that is
not real property.
7) Requires that, if a final judgment against an employer
arising from the employer's nonpayment of wages for work
performed in this state remains unsatisfied after a period
of 20 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 and be payable to
the people of the State of California 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.
8) Allows the employer to provide the Labor Commissioner with
a notarized copy of an accord reached with an individual
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holding an unsatisfied final judgment instead of filing a
surety bond described above. However, if the accord
provides for the judgment to be paid in installments, and an
installment payment is not made, the employer is no longer
excused from satisfying the bond requirements.
9) Provides 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
for purposes of this section if:
a) 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
b) 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.
1) Requires that any employer, or other person acting on
behalf of an employer, that conducts business in violation
of this section shall be subject to a civil penalty of
$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.
2) Exempts 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.
3) Provides notice requirements to the Labor Commissioner in
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the event of the surety bond being cancelled or terminated.
4) Provides the following in the event of an employer failing
to comply with the bond provisions listed above:
a) 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 ten days.
b) 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 (to the extent
specifically allowed to be recovered under existing law)
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 ten
years from the date of its creation.
5) Creates notice and filing requirements for the lien
provisions discussed above, as well as give the Labor
Commissioner the ability to foreclose on the property.
15) Prohibits the State Department of Public Health or the
State Department of Social Services from allowing a
long-term care industry employer from obtaining or renewing
a license if the employer is conducting business in
violation of the surety bond requirement. This bill defines
a long-term care industry as 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.
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16) Holds an individual, partnership, corporation, limited
liability company, joint venture, or association jointly and
severally liable for liens for unpaid wages against real
property if the entity provides janitorial, security guard,
valet parking, 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.
17) 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 failure by employer to provide such
notices shall not be a defense to the joint and several
liability as described above.
18) Allows 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.
19) Creates 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.
EXISTING LAW:
1)Provides 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
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material for the value of such labor and material. Existing
law also requires the Legislature to provide, by law, for the
speedy and efficient enforcement of such liens. (California
Constitution Article XIV, Section 3)
2)Provides for mechanics liens relating to services and supplies
authorized and provided on a work of improvement. Existing
law also regulates the conditions under which a mechanics lien
may be enforced. (Civil Code §§ 8400-8494)
3)Recognizes prejudgment wage liens against property as a remedy
in certain industries, including mining (Civil Code § 3060),
agriculture (Civil Code §§ 3061.5-3061.6), and logging (Civil
Code § 3065).
4)Requires the Labor Commissioner and his or her deputies and
representatives authorized by him or her in writing, upon the
filing of a claim therefor 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. (Labor
Code § 96)
5)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 Commissioner.
(Labor Code § 96.7)
6)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, properly before
the division or the Labor Commissioner, including orders of
the Industrial Welfare Commission, and is required to
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determine all matters arising under his or her jurisdiction.
(Labor Code § 98)
7)Authorizes the Labor Commissioner, at the Commissioner's
discretion and upon a final order, to place a lien on real
property for amounts due under the final order and in favor of
the employee or employees named in the order, with the county
recorder of any county in which the employer's real property
may be located. (Labor Code § 98.2(g))
8)Provides that, if any employer or other 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 shall be subject to a civil penalty.
(Labor Code § 558)
FISCAL EFFECT: According to the Senate Appropriations
Committee, 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, with
ongoing costs totaling $2.2 million. DIR also notes unknown,
potentially significant court costs associated with additional
proceedings regarding wage claims.
COMMENTS:
The Problem of "Wage Theft"
Various recent studies have highlighted concerns about alleged
widespread "theft of wages" in the United States and in
California, particularly in the underground economy. For
example, in 2009 the Ford Foundation sponsored a study that
surveyed 4,387 workers in low-wage industries in the three
largest U.S. cities - Chicago, Los Angeles and New York City.
The study revealed that 26 percent of workers in the sample were
paid less than the legally required minimum wage, and 60 percent
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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. (Broken Laws, Unprotected Workers:
Violations of Employment and Labor Laws in America's Cities,
Center for Urban Economic Development, National Employment Law
Project, UCLA Institute for Research on Labor and Employment
(2009).)
Another study focused on a survey of 1,815 workers in Los
Angeles County. The survey found that low-wage workers in Los
Angeles regularly experience violations of basic laws that
mandate a minimum wage and overtime pay and are frequently
forced to work off the clock or during their breaks. Other
violations documented in the survey include lack of required
payroll documentation, late payments, stealing tips, and
employer retaliation. (Milkman, Gonzalez and Narro, Wage Theft
and Workplace Violation in Los Angeles: The Failure of
Employment and Labor Law for Low-Wage Workers, UCLA Institute
for Research on Labor and Employment (2010).) The survey also
revealed that the various forms of nonpayment and underpayment
of wages take a heavy monetary toll on workers and their
families. Respondents who experienced a pay-based violation in
the previous work week lost an average of $39.81 out of average
weekly earnings of $318.00 (or 12.5 percent). Assuming a
full-year work schedule, these workers lost an average of
$2,070.00 annually out of total earnings of $16,536.00. The
survey estimated that, in a given week, 654,914 workers in Los
Angeles County suffer at least one pay-based violation.
Extrapolating from this figure, front-line workers in low-wage
industries lose more than $26.2 million per week as a result of
employment and labor law violations.
Effectiveness of Existing Methods of Recovering Unpaid Wages
Under existing law, when an employer fails to pay wages due, the
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employee has the right to file a claim against his or her
employer (or former employer) with the Department of Labor
Standards Enforcement (DLSE), which is directed by the State
Labor Commissioner. The Labor Commissioner has jurisdiction
over most private sector employees, except those that are bona
fide independent contractors. In some cases, according to case
law, the Commissioner does not have jurisdiction over those
working under collective bargaining agreements. Existing law
requires an employee who feels that his or her wages have been
wrongly withheld must go through DLSE and according to
statutorily prescribed procedures. (Labor Code Section 98 et
seq.) After conducting an investigation, the Labor Commissioner
may hold an administrative conference or hearing, or both. If a
party is unhappy with the Commissioner's decision, it can appeal
to the appropriate civil court. (Labor Code Section 98.2.)
However, even where a worker wins a favorable decision, the
process of collecting the award is often difficult and
ineffective. Irresponsible employers may have already hidden
their cash assets, declared bankruptcy, or otherwise become
judgment-proof.
Equally troubling, if not more troubling, than the high rate of
wage theft in California is the low rate of collections.
According to a 2013 report published by the National Employment
Law Project (NELP) and the UCLA Labor Center, only 17% of
workers who prevailed in their wage claim before the DLSE and
won a judgment were able to receive any payment between 2008 and
2011. Of those who did receive payment between 2008 and 2011,
workers were able to collect 15% of what was owed. In short,
the vast majority of wage theft victims received nothing, and
those that received anything received little of what they were
legally due.
ARGUMENTS IN SUPPORT
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Supporters, noting the 2010 wage theft study discussed earlier,
argue that wage theft is a significant problem in California,
with LA County's wage theft resulting in over $1 billion
unlawfully failing to reach the workers who desperately need it.
Supporters also note that current wage theft collection rates
are less than 20%, meaning the vast majority of scofflaw
employers are successful in robbing their workers of their
lawful wages. Supporters believe that this bill will help
combat the high rate of wage theft in California by creating a
simple lien process for the Labor Commissioner to use against
employers who rob workers of their wages. Supporters, noting
Wisconsin's success, argue that wage liens are simple,
effective, and a time tested approach to halting wage theft.
This bill is co-sponsored by the Service Employees International
Union, the Koreatown Immigrant Workers Alliance, and the Wage
Justice Center. They write:
"[This bill] 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. It
requires a business that has an outstanding unpaid judgment
against them to purchase a wage bond of $150,000. If it fails
to do that, the employer can be subject to a stop work order
and a lien at the Labor Commissioner's discretion.
This bill also gives the Labor Commissioner the authority to
hold individual business owners accountable for their debts to
workers. This will discourage business owners from rolling up
their operations and walking away from their debts to workers
and starting a new company.
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In addition, [this bill] 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."
"CONCERNS"
A number of groups, including the California Chamber of
Commerce, express "concerns" that certain provisions of this
bill will negatively impact employers who do not operate in the
underground economy. First, they express concern that this bill
imposes joint and several liability on employers for "property
services" contracts and state that an employer should not be
forced to cover the liabilities of another company that the
employer had no reasonable opportunity or ability to prevent.
Second, they argue that this bill improperly imposes personal
liability on lower-level supervisors and managers of a company
for wage and hour violations the employer could not prevent.
Finally, they argue that the amount of the proposed bond needs
to be adjusted to encourage payment of the underlying judgment.
They suggest the amount of the bond should be left to the
discretion of the Labor Commissioner to take into account the
totality of circumstances in order to achieve the necessary
balance.
PRIOR RELATED LEGISLATION:
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AB 2416 (Stone) of 2014 would have allowed an employee request
that the Labor Commissioner file 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.
AB 2416 was similar, but not identical to, AB 1164 (Lowenthal)
from 2013. AB 1164 was moved to the inactive file on the
Assembly floor and was not taken up for a vote.
AB 2416 was also similar, but not identical to, the introduced
version of AB 2517 (Eng) from 2012. AB 2517 was subsequently
amended to provide for wage liens only in the car wash and
polishing industry. AB 2517 failed passage on the Assembly
floor.
REGISTERED SUPPORT / OPPOSITION:
Support
9to5
Alliance of Californians for Community Empowerment
Alliance San Diego
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Asian Americans Advancing Justice- Los Angeles
Bet Tzedek Legal Services
California Employment Lawyers Association
California Immigrant Policy Center
California Labor Federation, AFL-CIO
California Professional Firefighters
California Rural Legal Assistance
California School Employees Association
Center on Policy Initiatives
Central American Resource Center
Centro Legal de la Raza
Chinese Progressive Association
CHIRLA-Coalition for Humane Immigrant Rights of Los Angeles
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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.
Community Services
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
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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
Koreatown Immigrant Workers Alliance (co-sponsor)
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LA Black Worker Center
La Colectiva De Mujeres
Liberty Hill Foundation
Los Angeles Alliance for a New Economy
Los Angeles Fight for $15 Organizing Committee
Maintenance Cooperation Trust Fund
Making Change at Walmart
Mi Familia Vota
National Association of Working Women
National Day Laborer Organizing Network
National Employment Law Project
One LA-IAF
Pacoima Beautiful
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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
San Francisco Progressive Workers Alliance
Santa Clara University
SEIU- CA (co-sponsor)
SoCalCosh, Southern California Coalition for Occupational Safety
and Health
Social Justice Learning Institute
Street Level Health Project
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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
Wage Justice Center (co-sponsor)
Workplace Justice Initiative
Worksafe, Inc.
Opposition
None on file.
Analysis Prepared by:Ben Ebbink / L. & E. / (916)
319-2091
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