BILL ANALYSIS Ó
SB 588
Page 1
Date of Hearing: August 19, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 588
(De León) - As Amended July 1, 2015
-----------------------------------------------------------------
|Policy |Labor and Employment |Vote:|5 - 2 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| |Judiciary | |7 - 3 |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill 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
SB 588
Page 2
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
noticed for either possessing or owing credits, money, or
property belonging to the judgment, is required to 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 fails or refuses to surrender
any credits, money, or property or pay any debts owing to
the judgment debtor will be liable to the commissioner in an
amount equal to the levy. This levy is limited to property
that is not real property and specifies these provisions do
not apply if enforcement of the judgment has been stayed on
appeal.
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
SB 588
Page 3
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) Provides that a subsequent employer similar in operation
and ownership to an employer with an unsatisfied final
judgment for unpaid wages must be deemed the same employer
for purposes of this section if 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 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.
9) Applies a civil penalty of $2,500 to any employer, or
other person acting on behalf of an employer, that violates
provisions of the bill and applies an additional fine of one
hundred dollars $100 for each calendar day that the employer
conducts business in violation of law, capped at $100,000.
10) Authorizes the Labor Commissioner to issue a stop order
prohibiting the use of employee labor by that employer or
use of subcontracted labor until the employer complies with
bonding requirements in the event of an employer failing to
comply with the bond provisions of the bill. 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.
11) Authorizes the Labor Commissioner to create a lien on the
real property and personal property of an employer 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. Unless the lien is satisfied or released, the lien
SB 588
Page 4
must continue until ten years from the date of its creation.
Creates notice and filing requirements for the lien and
authorizes the Labor Commissioner 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 to obtain or renew 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.
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) Specifies the bond requirements and the joint and several
liability do not apply 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.
18) 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
SB 588
Page 5
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.
FISCAL EFFECT:
Initial administrative costs of approximately $2.6 million
[Labor Enforcement and Compliance Fund (LECF)] and ongoing costs
of approximately $2.2 million (LECF) for the Department of
Industrial Relations to implement the provisions of this bill.
This bill imposes new duties on the Labor Commissioner, for
example the ability to utilize the levy process as a
supplemental option beyond placing liens. The bill also expands
duties related to surety bonds and the stop order process.
Additionally, the bill could also result in unknown but
potentially significant court costs associated with additional
proceedings regarding wage claims.
COMMENTS:
1)Background. Under existing law, when an employer fails to pay
wages due, the employee has the right to file a claim with the
SB 588
Page 6
Department of Labor Standards Enforcement (DLSE), which is
directed by the State Labor Commissioner. The collection rate
is low, however, because decisions on wage claims can
sometimes take 12-18 months to conclude. This long time
period can result in businesses closing or filing for
bankruptcy.
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
claimant.
2)Purpose. This bill is co-sponsored by the Service Employees
International Union, the Koreatown Immigrant Workers Alliance,
and the Wage Justice Center as an effort to provide the Labor
Commissioner with additional tools to collect from employers
who have exhausted all appeals for their non-payment of wages
and have final judgments owed.
Supporters note that California has a very 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.
Supporters believe that this bill will help combat the high
rate of wage theft in California by creating a lien process
for the Labor Commissioner to use against employers
post-judgment.
This is a key difference from prior attempts to address this
issue. Prior bills authorized a pre-judgment lien. This bill
authorizes the levy or lien to be filed only where a judgment
SB 588
Page 7
has already been rendered against the employee. This bill
also differs from prior legislation in that it authorizes a
levy against the employer's credit, money, or related property
(other than real property). A lien is authorized only where
the employer fails to satisfy a judgment after notice of
judgment and continues to operate without complying with a
specified bond requirement.
3)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 they 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.
4)Prior legislation.
a) AB 2416 (Stone) of 2014 would have allowed an employee
to request that the Labor Commissioner file a pre-judgment
SB 588
Page 8
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.
b) AB 1164 (Lowenthal) from 2013 was similar to AB 2416
(Stone). This bill was moved to the inactive file on the
Assembly floor and was not taken up for a vote.
c) AB 2517 (Eng) of 2012, as introduced, was also similar
to AB 2416 (Stone). The bill was subsequently amended to
provide for wage liens only in the car wash and polishing
industry. AB 2517 failed passage on the Assembly floor.
Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081