BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Richard Alarcon, Chair
Date of Hearing: July 9, 2003 2003-2004 Regular
Session
Consultant: Liberty Reiter Sanchez Fiscal:No
Urgency:No
Bill No: AB 1133
Author: Koretz
Amended: March 25, 2003
Subject:
Employment
Purpose:
To provide for automatic 100% increases, every six months,
to judgements for nonpayment of wages or penalties entered
against employers for violations of provisions of the Labor
Code relating to payment of wages, as specified.
Analysis:
1.Authorizes an employee to file an administrative claim
with the Labor Commissioner or to bring a civil action
against an employer for the nonpayment of wages and
penalties. An employee who brings an action is entitled
to recover costs and attorney's fees.
2.Authorizes the Labor Commissioner to require an employer
to deposit a bond where the employer has failed to pay
any judgment for the nonpayment of wages for more than 10
days after the time to appeal the judgment has expired.
3.Authorizes an employee, where an employer has violated
the law or failed to pay a judgment twice within a ten
year period, to bring an action for a temporary
restraining order prohibiting the employer from doing
business in the state until the employer deposits a bond
to satisfy the unpaid judgment.
This Bill
1.Requires that, if any judgment for nonpayment of wages or
penalties remains unpaid for six months after the time to
appeal the judgment has expired or any appeal has been
concluded, the amount of the judgment shall double.
2.Provides that the amount of the judgment is again doubled
for each additional six-month period during which the
judgment remains unpaid.
3.Requires a court to award attorney's fees and costs to
the employee or the Labor Commissioner who enforces such
a judgment.
Comments:
1. Problem with Enforcement and Effectiveness of
Increased Penalties:
The Department of Labor Standards and Enforcement
(DLSE), the labor law enforcement arm of the Department
of Industrial Relations, is understaffed, has limited
resources and is unable to pursue all labor law
violators to the fullest extent of the law. DLSE
currently has 408 employees statewide to address labor
law issues in the following industries: apparel,
construction, agriculture, eating and drinking, and
janitorial services. The Bureau of Field Enforcement
(BOFE) is an administrative program within DLSE whose
mandate it is to enforce minimum labor standards to
ensure that employees are not required or permitted to
work in substandard or unlawful conditions. Currently,
within BOFE, two joint enforcement programs work to
carry out this goal. One program is known as the
Targeted Industries Partnership Program (TIPP), which
investigates the garment, agriculture, restaurant,
janitorial and construction industries, and the second
is the Underground Economy Unit (UEU), which, in
conjunction with Employment Development Department
staff, investigates businesses which operate in the
underground economy. According to the 2002 Bureau of
Field Enforcement Annual Report (which incorporates
numbers from BOFE, TIPP and UEU) 8,684 investigations
Hearing Date: July 9, 2003 AB
1133
Consultant: Liberty Reiter Sanchez
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Senate Committee on Labor and Industrial Relations
were conducted and 1,520 citations were issued,
resulting in $23,426,902 in wages being collected.
There has been a long standing debate regarding whether
increased enforcement or enhanced penalties will better
serve the needs and ensure the rights of the working men
and women of this state. Some argue that penalty
enhancements are useless in the face of the
ever-expanding underground economy, where scofflaw
employers will skirt the law, regardless of the severity
of the penalty. Others contend that heightened
penalties serve as an appropriate disincentive for bad
actor behavior, ensuring that employers who might
otherwise skirt the law are compliant.
2. Code of Civil Procedure Issue:
Existing law within the Code of Civil Procedure provides
that interest on judgements accrues at a rate of 10
percent per annum on the principal amount of a money
judgment, which remains unsatisfied. Existing law
further reserves with the Legislature the right to change
the rate of interest to a rate of less than 10 percent
per annum. Existing law does not however, reserve the
right with the Legislature to change the rate of interest
to a rate above 10 percent per annum. Accordingly, it
may be necessary to amend this bill to reflect an
amendment to the Code of Civil Procedure specifying an
alternate interest accrual rate for the purposes of this
measure.
3. Article vs. Chapter:
As written, the bill applies to one of the three Articles
within the Labor Code Chapter entitled "Payment of
Wages." For the sake of clarity and in order to ensure
that employees intended to be covered by this bill are
not inadvertently left uncovered, the author may wish to
amend the bill to specify "Chapter" rather than "Article"
on page 1, line 4.
Hearing Date: July 9, 2003 AB
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Consultant: Liberty Reiter Sanchez
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Senate Committee on Labor and Industrial Relations
4. No Cap:
This bill provides for the automatic doubling of awards
and penalties for every six-month period during which the
sanctioned employer fails to satisfy the award. There is
neither a dollar cap nor a time frame cap specified in
this bill. The result is that there is no limit on the
amount that the award or penalty might eventually reach.
The author may wish to consider amending the bill to
reflect an appropriate cap, which would truly incentivise
prompt payment.
5. Proponents :
Supporters argue that this bill would hold employers
accountable who try to circumvent the law by not paying
wage and hour judgments lawfully entered against them.
The sponsors of the bill state that there are many cases
where employees go through the entire wage claim
adjudication process with the Labor Commissioner, win
their judgment and are still unable to receive their
unpaid wages or penalties because the employer simply
refuses to pay. Since the amount of such judgments is
generally not sufficient to make collection by a
collection agency profitable, workers receive little, if
any, further assistance in recovering their owed wages or
penalties. Supporters state that this bill not only
encourages employers to pay their judgments and pay them
on time, but it also increases the incentive for
collection agencies to accept low-wage workers' cases
once the penalties begin to accrue. Supporters also point
out that the provisions of this bill do not trigger until
six months after the time to appeal a judgment has
expired, or such an appeal has been concluded, when there
is no justification for an employer to refuse to satisfy
the judgment.
6. Opponents :
Hearing Date: July 9, 2003 AB
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Senate Committee on Labor and Industrial Relations
Opponents argue that this bill is gross overkill and
would set a new and very onerous precedent for employers.
Opponents state that wage judgments should only be
subject to a reasonable penalty or a set amount of
interest. Opponents also object to the provisions of the
bill allowing for the recovery of attorneys' fees and
costs. Instead opponents contend, once the Labor
Commissioner has entered a judgment, it should be the
sole responsibility of the Labor Commissioner to enforce
payment of the judgment.
7. Dual Referral:
This bill will be heard by Senate Judiciary Committee
upon passage by this committee.
8. Vote History: This bill passed out of the Assembly
with a vote of 46 - 29.
Support:
American Apparel
Asian Pacific American Legal Center (Co-sponsor)
Bet Tzedek Legal Services (Co-sponsor)
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Employment Lawyers Assn.
California Independent Public Employees Legislative Council
California Labor Federation, AFL-CIO
California Organization of Police and Sheriffs
California Professional Firefighters
California Rural Legal Assistance Foundation
California Teamsters Public Affairs Council
Coalition for Humane Immigrant Rights of Los Angeles
Engineers and Scientists of California
Garment Worker Center (Co-Sponsor)
Hotel Employees, Restaurant Employees International Union
Korean Immigrant Worker Advocates (Co-sponsor)
La Raza Centro Legal
Hearing Date: July 9, 2003 AB
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Senate Committee on Labor and Industrial Relations
Los Angeles Worker Advocates Coalition (Co-sponsor)
Maintenance Cooperation Trust Fund (Co-Sponsor)
Peace Officers Research Association of California
Professional and Technical Engineers, Local 20, IFPTE
Sweatshop Watch (Co-Sponsor)
Union of Needletrades, Industrial and Textile Employees
(Co-sponsor)
United Food & Commercial Workers Region 8 States Council
Opposition:
California Chamber of Commerce
California Manufacturers & Technology Association
Engineering and Utility Contractors Association
* * *
Hearing Date: July 9, 2003 AB
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Consultant: Liberty Reiter Sanchez
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Senate Committee on Labor and Industrial Relations