BILL ANALYSIS
AB 2509
Page 1
Date of Hearing: April 12, 2000
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Darrell Steinberg, Chair
AB 2509 (Steinberg) - As Introduced: February 24, 2000
SUMMARY : Revises statutes relating to the administrative and
civil enforcement of wage and hour laws including wage
collection and enforcement procedures before the Labor
Commissioner (Commissioner). Specifically, this bill :
1)Provides that in an administrative wage claim proceeding
(Berman hearing) before the Commissioner, a notice for
production of documents, which is served by mail, may be used
in lieu of subpoena, which requires personal service.
2)Provides that the legal rate of interest on due and unpaid
wages at a Berman hearing shall be at the rate established by
Civil Code Section 3289(b), which is 10%.
3)Provides that following a Berman hearing, an employer filing
an appeal shall post an undertaking in the amount of the
Commissioner's final order, decision or award. Provides
further that the requirement of judicial arbitration does not
apply in such proceedings. Provides that in cases where the
Commissioner represents the wage claimant in such proceedings,
the Commissioner may be awarded attorneys fees in the same
manner as private counsel representing a wage claimant.
4)Provides if the United States Department of Labor (Labor
Department) determines that the Commissioner has erred in
dismissing the complaint of an employee of unlawful
retaliation, as specified, the Commissioner shall, within 15
days after receipt of the Labor Department's determination,
either notify the parties of the ongoing of the investigation
of the employees complaint, or shall issue a new determination
in the matter.
Provides that an employee may file a civil action for unlawful
retaliation, as specified, without first filing a
discrimination claim before the Commissioner, and that the
limitation periods for such administrative remedies do not
apply in such a civil action.
5)Provides that the parent of and substantial shareholders in a
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corporation are jointly and severally liable with the
corporation for unpaid wages and penalties. Defines
"substantial shareholder" as provided in Labor Code section
3717, as a shareholder who owns at least 15 percent of the
total value of all classes of stock, or fifteen percent of the
beneficial interests in the corporation.
6)Provides that a successor, as defined, to an employer who owes
wages to his or her former employees is liable for those
wages.
7)Provides that in cases where wages are paid with a check for
which payment is refused due to insufficient funds, the
imposition of up to 30 days' waiting time penalties applies to
all employers, rather than employers only in the building and
construction industry.
8)Clarifies that Labor Code Section 1194, which provides for an
award of attorneys fees for an employee in cases involving
failure to pay minimum wage and overtime wages, is separate
from, and not controlled by Labor Code Section 218.5, which
provides for prevailing party attorneys fees in other wage
cases.
9)Provides that the legal rate of interest on due and unpaid
wages in a civil action for unpaid wages shall be established
by Civil Code Section 3289(b), which is 10%.
10)Provides that an employer's itemized wage statement shall
include, among other information, the number of piecework
units earned and any applicable piece rate if paid on a
piecework basis, and for non-exempt employees, the applicable
hourly rates in effect during the pay period and the hourly
rate of pay and hours worked, where applicable.
Clarifies that the employer shall keep specified payroll
records for employees paid in cash and by check.
Provides, in the case of a knowing and intentional failure by
an employer to comply with the itemized wage statement
requirements, for an employee to recover a penalty of up to
$100 per payroll period up to a maximum of $10,000. Provides
that an employee may bring a complaint before the Commissioner
or file a civil action for damages or penalties, and
attorney's fees.
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11)Provides that in a case where an employer fails to maintain
records that identify each employee to whom wages are paid,
penalties shall be computed by multiplying the number of
employees employed on the date the penalty for the preceding
year, unless the employer affirmatively establishes evidence
that supports a lesser penalty based upon proof of a lesser
number of affected employees.
12)Provides for penalties for an employer who violates the
requirement that no employer shall require any employee to
work during any meal or rest period mandated by an applicable
order of the Industrial Welfare Commission (IWC). Provides
for penalties of $50 per employee per pay period and payment
of an amount equal to twice the average hourly rate of
compensation for the employee for the full length of the meal
or rest period. Provides that an employee may bring a
complaint before the Commissioner or file a civil action or
for damages or penalties, and attorney's fees.
13)Provides that the Commissioner may order an employer to post
a bond if the employer fails to satisfy a final judgment for
interest, penalties and other demands for compensation within
the jurisdiction of the Commissioner, as well as unpaid wages.
Provides that the bond shall cover such interest, penalties,
or other demands, as well as unpaid wages.
14)Provides that the Commissioner shall, under specified
circumstances, order the employer to post a workplace notice
describing the nature of a violation and related information.
15)Provides that any amounts paid directly by a patron to a
dancer employed by an employer subject to IWC Order No. 5 or
10 shall be deemed a gratuity.
16) Prohibits an employer from deducting from a gratuity
indicated by a patron on a credit card slip any credit card
payment processing fee or cost. Requires payment of
gratuities made by credit card to be made to the employees not
later than the next regular payday following the date the
patron authorized the credit card payment.
17)Provides that an employer shall maintain payroll records
showing the number of piece-rate units earned by and any
applicable piece rate paid to employees.
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18)Provides that the civil penalty for an employer who willfully
fails to maintain specified payroll records includes, in
addition to records required by statute, records required by
any applicable wage orders of the IWC. Revises the penalty
for a violation of this section from $500 to $100 per employee
for each payroll period up to a maximum period of three years.
19)Provides that the liquidated damages for a violation of
minimum wage laws may be awarded in a hearing before the
Commissioner in the same manner as a civil action under
current law.
20)Provides that with respect to a claim for a failure to pay
minimum wages, the Commissioner may, in the same proceeding,
order both payment of wages owed, interest thereon, statutory
liquidated damages and civil penalties.
EXISTING LAW :
1)Provides in a Berman hearing for documents to be obtained by
subpoena served by personal service, but not a notice
delivered by mail.
2)Establishes the rate of interest on unpaid wages a Berman
hearing based on a statute which has been repealed.
3)Provides for the appeal to and a de novo review in court of
the Commissioner's order, decision, or award following a
Berman hearing.
4)Provides for an appeal to the Labor Department of a dismissal
of an employee's complaint of unlawful discrimination.
5)Provides under Labor Code section 2717 for a civil action to
hold substantial shareholders of a corporation without
workers' compensation insurance liable for reimbursement of
the Uninsured Employers Fund.
6)Provides under Labor Code section 2684 that in garment
manufacturing, a business which is a successor to an employer
who owes wages to the former employees is liable for those
wages if the successor meets specified criteria.
7)Provides a penalty of up to 30 days' wages for an employer in
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the building and construction trades who intentionally pays
wages with a check for which payment is refused due to
insufficient funds.
8)Provides for an employee to recover in a civil action for a
failure to pay minimum wage or overtime compensation
reasonable attorney's fees, and costs of suit.
9)Provides under Civil Code Section 3289(b) for recovery of
interest at a rate of 10% in a civil action for a breach of
contract, as specified.
10)Provides that when wages are paid, an employer shall issue an
itemized wage statement including specified information
including net and gross wages earned; total hours worked; the
dates of the period covered; and all deductions.
Provides, in the case of a knowing and intentional failure by
an employer to comply with the itemized wage statement
requirements, an employee may recover a penalty of actual
damages or $100, whichever is greater, plus costs and
reasonable attorneys fees.
11)Provides that an employer who violates the itemized wage
statement requirements is subject to a civil penalty in the
amount of $250 per employee per violation in an initial
citation and $1,000 per employee for each violation in a
subsequent citation. Provides that the Commissioner shall
take into consideration whether the violation was inadvertent,
and may decide not to penalize an employer for a first
violation when that violation was due to a clerical error or
inadvertent mistake.
12)Provides, under Wages Orders of the IWC for meal periods and
rest periods. Provide under the Wage Orders for an "on duty"
meal period when the nature of the work prevents an employee
from being relieved of all duty and when by written agreement
between the parties an on-the-job paid meal period is agreed
to.
13)Provides that the Commissioner may order an employer to post
a bond to ensure future payment of wages in cases where the
employer has failed to satisfy a final judgment for nonpayment
of wages.
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14)Provides for employers to post specified information
including applicable wage orders of the IWC, information on
safety and health, harassment and discrimination in
employment, and rights under the Family and Medical Leave Act.
15) Defines "gratuity" to mean any tip, gratuity, money or part
thereof, which has been paid or given to or left for an
employee by a patron of a business over and above the actual
amount due for services rendered or for goods, food, drink, or
articles sold or served to the patron.
16) Provides that no employer shall collect, take or receive any
gratuity or part thereof paid, given or left for an employee
by a patron, or deduct any amount form wages due an employee
on account of such gratuity. Provides that this prohibition
does not apply under specified circumstances.
17) Requires an employer to keep payroll records containing
specified information including the names, addresses and hours
worked daily by employees.
18) Provides a civil penalty of $500 for an employer who fails
to keep specified payroll records.
19)Provides that the liquidated damages in an amount equal to
the wages unlawfully unpaid and interest thereon for a
violation of minimum wage laws may be awarded in a civil
action.
20)Provides for the Commissioner to issue a civil penalty
citation of $50 for an initial violation of minimum wages and
$250 for subsequent violations, and establishes a proceeding
to contest such a penalty citation.
Provides for the Commissioner to order payment of minimum
wages owed to an employee in a separate proceeding before the
Commissioner under Labor Code section 98.
FISCAL EFFECT : Unknown
COMMENTS :
1)Current statutes, regulations, and wage orders of the IWC
establish requirements for the payment of wages including
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minimum wages and overtime, hours of work, and a framework of
administrative and civil remedies for violations of wage and
hour laws. This bill revises the administrative and civil
procedures, remedies and record keeping requirements for the
stated purpose of strengthening enforcement of existing wage
and hour standards. It does not increase minimum wages or
revise overtime requirements.
2)Revisions in the administrative procedures for wage claims
before the Commissioner and appeals of the Commissioner's
decision include:
a)Allowing records to be obtained through a notice, rather
than a subpoena. A subpoena, which is allowed under
current law requires personal service. A notice may be
mailed.
b)Allowing the commissioner to combine two separate
proceedings established under current law, one for payment
of minimum wages owed, and another for civil penalties for
failure to pay minimum wage, into a single proceeding.
c)Providing that the Commissioner may award liquidated
damages for a minimum wage violation instead of requiring
the Commissioner or employee to file a civil suit to
recover such damages. Under current law such damages may
be recovered in a civil action by the Commissioner or the
wage claimant, but not in an administrative hearing before
the Commissioner.
d)Establishing the rate of interest on unpaid wages at 10% in
both administrative and civil court cases. Current law
cites a repealed section and is confusing.
e)Requiring an employer appealing a Commissioner's order
following a hearing to post an undertaking and waiving the
requirement for judicial arbitration in such cases. The
judicial arbitration hearing may be viewed as redundant to
the Berman hearing in these cases.
3)Revisions related to wage and payroll records include:
a)Providing that itemized wage statements and central payroll
records include piece rate and hourly pay rate information
for piece rate and hourly workers.
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b)Increasing the penalties for violation of itemized wage
statement and central payroll records requirements.
c)Shifting the burden of proof concerning the number of
workers at an establishment where payroll records are
missing.
4)Revisions related to penalties for violations of other wage
and hour standards include:
a)Applying penalties for intentionally issuance of a bad
(insufficient funds) payroll check applies to all
employers rather than construction employers only. Under
current law, the penalty is limited to construction
employers.
b)Requiring an employer determined by the Commissioner to
have engaged in a pattern and practice of wage law
violations to post a workplace notice of findings and the
Commissioner's telephone number to report further
violations.
5)Revisions for the purpose of clarifying existing law include:
a)Clarifying that an employee may bring a civil action for
unlawful retaliation without exhausting administrative
remedies, as specified, with the Commissioner.
b)Clarifying that Labor Code Section 1194, which provides for
an award of attorneys fees for an employee in cases
involving failure to pay minimum wage and overtime wages,
is separate from, and not controlled by Labor Code Section
218.5, which provides for prevailing party attorneys fees
in other wage cases.
6)This bill also provides for unpaid wages to be collected from
substantial shareholders and successor entities under
specified circumstances. The substantial shareholders
provision is based on substantial shareholder liability for
corporations which lack workers' compensation insurance. The
successor entity provision is based on the existing provision
related to successor liability for unpaid wages in the garment
manufacturing industry.
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7)Last year the supporters sponsored similar legislation in AB
633 and AB 1652, which passed and were vetoed. This bill does
not contain a number of controversial provisions proposed in
last year's legislation. For example, it does not establish a
private right of action to recover and share in a portion of
the state's civil penalties for wage violations, and for
minimum wage and overtime violations. It does not carry
forward a proposal to establish liquidated damages for
overtime violations. It does not prescribe the Commissioner's
required efforts to collect wage judgements.
8)Supporters state that California has a large and growing
"underground economy" of employers who are chronic violators
of wage and hour, safety, and tax laws. Such employers pay
cash under the table or with checks that bounce, fail to
report and pay employment taxes, work their employees long
hours without rest breaks, and avoid paying wage judgments
issued against them. They cheat workers out of billions of
dollars in wages owed to them under minimum wage and overtime
laws. California's underground economy supplants an estimated
$60 billion in legal business transactions. According to
executive orders concerning the expanding underground economy
issued by Governor's Deukmejian and Wilson, the state's loss
of income taxes alone increased from $2 billion in 1986 to $3
billion in 1993.
They state that this bill streamlines the Commissioner process
by allowing document requests by mail; by allowing the
commissioner to re-open a discrimination case on remand from
the Department of Labor; and providing for a "one-stop" civil
penalty system where both wages and penalties can be recovered
at one time; ensures that workers are provided adequate record
keeping information, ensures that employers cannot easily
escape wage liability, and that this bill clarifies areas of
the law.
9)Opponents state that they have serious concerns regarding
nearly all of the twenty-nine changes proposed by this bill
and their impact on California's employers who even
inadvertently violate a wage and hour law. These include:
authorizing the Commissioner to create new, different rules of
evidence and subpoenas process for wage and hour claims;
eliminating judicial discretion to require non-binding
arbitration on appeals; reopening of previously dismissed
claims when letters criticizing a state program are filed with
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the U.S. Department of Labor; establishment of joint, and
several liabilities for substantial shareholders, parent
corporations and successors for unpaid wages and penalties;
mandated private taxpayer payment of civil servant attorneys;
wage and hour claims permitted in civil court prior to
exhaustion of administrative remedies; new commissioner
authority to assess civil damages, including liquidated
damages; and new mandated payment of restitution plus civil
penalties for failure to pay minimum wage consisting of all
underpaid wages, any interest owed and statutory liquidated
damages.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation, AFL-CIO
Employment Law Center, Legal Aid Society of San Francisco
Engineers and Scientists of California
Exotic Dancers Alliance
Hotel Employees, Restaurant Employees International Union
Mexican American Legal Defense and Educational Fund
Region 8 States Council of the United Food & Commercial Workers
Service Employees International Union
Transport Workers Union of America
Opposition
Associated General Contractors
California Chamber of Commerce
California Manufacturers and Technology Association
California Retailers Association
Civil Justice Association of California
Western Growers Association
Analysis Prepared by : Ralph Lightstone / L. & E. /
(916)319-2091