BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Richard Alarcon, Chair
Date of Hearing: April 9, 2003 2003-2004 Regular
Session
Consultant: Liberty Reiter Sanchez Fiscal:Yes
Urgency:No
Bill No: SB 796
Author: Dunn
Amended: March 26, 2003
Subject: Employment
Purpose:
To establish civil penalties for violations of the Labor
Code and to enable aggrieved employees to maintain a civil
action when the Labor and Workforce Development Agency
(including its departments, divisions, commissions, boards,
agencies or employees) (Agency) does not pursue such an
action.
Analysis:
(1)Existing law, authorizes the Labor and Workforce
Development Agency (comprised of the Department of
Industrial Relations, the Employment Development
Department, the Agricultural Labor Relations Board and
the Workforce Investment Board) to assess and collect
civil penalties for violations of the Labor Code, where
specified.
The Attorney General is authorized to seek appropriate
injunctive relief and file charges against employers for
criminal violations of the Labor Code, where specified.
While many Labor Code sections provide for criminal
penalties, many sections do not provide for
corresponding civil penalties.
Business and Professions Code Section 17200, also known
as the "Unfair Competition Act" (UCA) authorizes
aggrieved individuals to act on their own behalf in the
capacity of "private attorney general" (PAG) when
maintaining a claim against a business for violating the
law or competing unfairly.
Individuals aggrieved by violations of the Labor Code
are not expressly permitted to act in the capacity of
PAG in the filing of civil actions against their
employers.
(2)This Bill , entitled the "Labor Code Private Attorneys
General Act of 2004", has four
components:
(a) Authorizes recovery through civil action of civil
penalties provided for under the Labor Code by
authorizing aggrieved employees to act as PAG on
behalf of themselves or others where the Agency does
not pursue such an action.
(b) Establishes civil penalties where the Labor Code is
silent in the amount of $100 per employee per pay
period for the initial violation and $200 per employee
per pay period for subsequent violations when the
"person" employs one or more employees and $500 per
violation where the "person" does not employee one or
more employees.
(c) Provides for a distribution formula as follows for
penalties collected by an aggrieved individual: 50% to
the General Fund, 25% to the Agency and 25% to the
aggrieved employee.
(d) Provides for the award of attorneys' fees and costs
to aggrieved employees who prevail, in whole or in
part in these civil actions.
Comments:
(3) "Private Attorney General" (PAG):
When individuals have a right to act in the capacity of
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PAG such individuals are authorized to maintain a claim
on their own behalf or on behalf of others. To this end,
the individuals may represent themselves or may retain
counsel for such representation.
(4) Business and Professions Code Section 17200 "Unfair
Competition Act" (UCA):
Existing law provides for the right to act in the
capacity of PAG for "unfair competition" cases. The law
has been interpreted by the courts to provide broad and
expansive protections to California's consumers. The
law was first enacted in the 1930's to stop businesses
from using unfair practices to gain advantage over
competitors. Based on the underlying premise that such
anti-competitive behavior creates an unfair playing
field to the detriment of consumers, the law has since
been used to protect consumers from instances of unfair,
unlawful or fraudulent behavior.
An action under this code section may not be brought by
an individual in order to vindicate his own interests,
instead, such action must be brought on behalf of the
general public. To that end, even if the individual
bringing the action was actually harmed by the unfair
business practice, the individual may not recover
damages, but instead remedy is limited to injunction and
restitution.
Amongst other things, this law has successfully been
used on behalf of employees in cases where a company was
found to be ignoring California's overtime laws and
where an employer's policy of calculating employees'
wages included deduction of losses for unidentified
returns.
(5) Distinction Between Right to Act as Private Attorney
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General Under SB 796 and
The UCA:
This PAG rights afforded individuals under this bill are
separate and distinct from those afforded individuals
under the UCA. While PAG rights have been interpreted to
have broad applicability under the UCA, the right to act
as a PAG under this bill is available to further the
purposes of protecting the rights of workers under the
Labor Code. Additionally, unlike the UCA, this bill
entitles an individual to act in the capacity of PAG to
seek remedy of a labor law violation solely because they
have been aggrieved by that violation. Finally, this
bill provides for a percentage share of penalties to go
directly to the aggrieved worker, unlike the UCA, which
does not entitle an individual claimant to obtain
damages.
(6) Labor Law Enforcement in an Era of Limited Staff and
Resources:
At issue in this bill is the appropriate role of
employees in protecting their rights under the Labor Code
when the government entity mandated to enforce the Labor
Code is unable to do so due to budgetary and staff
constraints. Conventional wisdom asserts that more
resources should be put in place and more staff hired if
existing staff and resource allotments are insufficient
to effectuate the mandated duties of the government.
Additional resource dedication as a remedy is, an
impossibility where a budgetary deficit exists.
The bill's intent language states that "adequate
financing of essential labor law enforcement functions is
necessary to achieve maximum compliance with state labor
laws" and that "[s]taffing levels for state labor law
enforcement agencies, have, in general, declined over the
last decade and are likely to fail to keep up with the
growth of the labor market in the future" and that,
accordingly, "[i]t is therefore in the public interest to
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provide that civil penalties for violation of the Labor
Code may also be assessed and collected by aggrieved
employees acting as private attorneys general."
Arguably, in a perfect world, there would be no need for
the right to act as PAG, yet the fact remains that due to
continuing budgetary and staffing constraints, full,
appropriate and adequate Labor Code enforcement is
unrealizable if done solely by the Agency.
(7) Staff Comments :
(a)The term "person" is defined for the general purposes
of the Labor Code to mean any "person, association,
organization, partnership, business trust, limited
liability company or corporation." The term "person"
has a different definition for application in the
"Garment Manufacturing" Part of the Labor Code. That
Part of the Labor Code is in the same Division of the
Labor Code, entitled "Employment Regulation and
Supervision," in which this bill, if enacted, would be
located. The term "person" is used throughout the
Labor Code, often interchangeably with the term
"employer," but when the term "person" is used, it is
interpreted to provide a more expansive and
comprehensive applicability than the term "employer."
Additionally, often when the term "person" is used it
is used in conjunction with the phrase "or officer or
agent thereof," to provide even broader applicability.
As the author is creating a new titled Part to the
Labor Code, the author may wish to add a definition of
"person" specifically applicable to that Part of the
Labor Code.
(b)The bill specifies a formula for distribution of
civil awards where an aggrieved employee has prevailed
against a "person employing one or more employees,"
yet the bill provides no formula for instances where
the Agency has prevailed against a person who does not
employ one or more employees. The author may wish to
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Senate Committee on Labor and Industrial Relations
specify whether such collected penalties should go to
the General Fund, the Agency or elsewhere.
(c)The bill specifies that an action, may not be
maintained by an aggrieved employee, if the Agency
cites a person and initiates proceedings for a
violation of the code on the same facts and theories.
The author may wish to amend the bill to clarify that
this prohibition would only be applicable if the
Agency proceeded under the "same labor code section or
sections under which the aggrieved employee is
attempting to recover a civil penalty on behalf of
himself or herself or others." Ostensibly, without
this clarification an aggrieved employee might be
inadvertently precluded from maintaining an action
under a different Labor Code section violation which
the Agency has declined to pursue, but where the basis
of such action relies on the same facts and theories
as the action which the Agency is pursuing.
(8)Dual Referral:
If passed by this committee, this measure will be
re-referred to the Senate Committee on Judiciary.
1. Proponents , the California Labor Federation asserts that
in the last decade state government labor law enforcement
functions have failed to keep pace with the growth of the
economy and the workforce. Additionally they note that,
resources available to county district attorneys, for
prosecution of Labor Code violations as crimes, are
similarly lacking.
Proponents contend that the states current inability to
enforce labor laws effectively is due to inadequate
staffing and to the continued growth of the underground
economy. This inability coupled with the states severe
budgetary shortfall requires a creative solution that
will help the state crack down on labor law violators.
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The California Rural Legal Assistance Foundation cites
the resurgence of violations of Labor Code prohibitions
against the "company store," as an example of the need
for this bill. This occurs either when the employee is
required to cash his check at a store owned by his
employer and the employer charges a fee, or where the
employer coerces the employee to purchase goods at that
store. Currently, violations of these code sections are
misdemeanors but no civil penalty is attached. Advocates
are unaware of any misdemeanor prosecution having been
undertaken in relation to these code sections.
2. Opponents , contend that this bill tips the balance of
Labor Law protection in disproportionate favor to the
employee to the detriment of already overburdened
employers. Opponents cite the fact that employees are
entitled to attorneys' fees and costs if they prevail in
their actions under this bill, yet the bill fails to
provide similar attorneys fees and costs for prevailing
employers. Additionally, opponents cite the fact that
there are no requirements imposed upon employees prior to
filing civil action such as preliminary claim filing with
the Labor Commissioner. Furthermore, opponents complain
that aggrieved employees may file on behalf of a class,
but are not required to fulfill class certification
requirements.
The California Manufacturers and Technology Association
(CMTA) asserts that California has a formal
administrative procedure to handle Labor Code violations
that is both economical and efficient. According to the
CMTA, in many instances the amount in dispute is so small
that it would not warrant an employer going to court
because the cost of legal representation would be so
high. Finally, the CMTA alleges that, since there is no
requirement for the employee to exhaust the
administrative procedure or even file with the Labor
Commissioner the bill is an "invitation for bounty
hunting attorneys to aggressively pursue these cases."
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Senate Committee on Labor and Industrial Relations
Support:
American Federation of State, County, and Municipal
Employees
California Applicants' Attorneys Association
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Independent Public Employees Legislative Council
California Labor Federation, AFL-CIO
California Rural Legal Assistance Foundation
California State Association of Electrical Workers
California State Pipe Trades Council
California Teamsters Public Affairs Council
Consumer Attorneys of California
Engineers and Scientist of California, IFPTE Local 20,
AFL-CIO
Hotel Employees & Restaurant Employees International Union
Professional and Technical Engineers, IFPTE Local 21,
AFL-CIO
Region 8 States Council of the United Food & Commercial
Workers
Western States Council of Sheet Metal Workers
Opposition:
Associated General Contractors of California and the AGC,
San Diego Chapter
California Employment Law Council
California Manufacturers and Technology Association
California Chamber of Commerce
Civil Justice Association of California
Hearing Date: April 9, 2003 SB
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Consultant: Liberty Reiter Sanchez
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Senate Committee on Labor and Industrial Relations