BILL ANALYSIS
AB 1563
Page 1
Date of Hearing: April 22, 2009
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
William W. Monning, Chair
AB 1563 (Committee on Labor and Employment) - As Amended:
April 14, 2009
SUBJECT : Contracts or agreements for labor or services.
SUMMARY : Codifies an enforcement protocol for a provision of
existing law dealing with financially-insufficient contracts for
labor or services. Specifically, this bill :
1 Provides that, in any investigation by the Economic and
Employment Enforcement Coalition (EEEC) or the Bureau of Field
Enforcement (BOFE) involving a labor contractor employing 15
or more employees in the construction, farm labor, garment,
janitorial or security guard industries, if the Division of
Labor Standards Enforcement (DLSE) has a reasonable suspicion
that violations of "financial significance" have been
committed (or have been cited but not set aside within 15
days), it shall do the following:
a) Issue an administrative subpoena for the relevant
portions of any written contract covering the work
performed by the contractor.
b) If there is no written contract, obtain from the
contractor the relevant terms of any oral contract and make
a written record of the information provided by the
contractor.
c) Record whether the terms of an applicable contract
appear to violate the provisions of current law and, if so,
whether the DLSE filed a legal action. If no legal action
was filed, the record shall explain the reasons why DLSE
chose not to do so.
2)Defines a violation of "financial significance" to include the
following violations which are within the jurisdiction of the
DLSE:
a) Failure to have a workers' compensation insurance policy
covering all employees.
AB 1563
Page 2
b) Multiple minimum wage violations over a period of one or
more months.
c) Multiple serious overtime violations over a period of
one or more months.
3)Requires the DLSE to make a record, including a brief analysis
and explanation of reasons, in each instance that provisions
of specified current law were violated but it determined that
implementation of these requirements was not feasible or
practicable.
EXISTING LAW :
1 Prohibits a person or entity from entering into a contract or
agreement for labor or services with a construction, farm
labor, garment, janitorial, or security guard contractor where
the person or entity knows or should know that the contract or
agreement does not include funds sufficient to allow the
contractor to comply with applicable laws governing the labor
or service to be provided.
2)Establishes a rebuttable presumption that there has been no
violation of the law where the contract or agreement is in
writing and meets specified conditions.
3)Authorizes an aggrieved employee to bring an action to recover
the greater of his or her actual damages or $250 per employee
per violation for an initial violation and $1,000 per employee
for each subsequent violation, in addition to injunctive
relief.
FISCAL EFFECT : Unknown
COMMENTS : Senate Bill 179 (Alarcon) of 2003 enacted Labor Code
Section 2810, which prohibits a person or entity from entering
into a contract or agreement for labor or services with a
construction, farm labor, garment, janitorial, or security guard
contractor where the person or entity knows or should know that
the contract or agreement does not include funds sufficient to
allow the contractor to comply with applicable laws governing
the labor or service to be provided.
At the time, the author and supporters of the bill argued that
the legislation was necessary to protect workers and law-abiding
AB 1563
Page 3
employers from employers and contractors that knowingly enter
into contracts and agreements that are financially inadequate to
permit compliance with applicable laws. The purpose of this
bill was to establish state policy regarding financially
insufficient contracts in industries most associated with the
underground economy.
Since the enactment of Labor Code Section 2810, some worker
advocates have questioned whether the Division of Labor Standard
Enforcement (DLSE) is properly enforcing the provisions of the
law, or even investigating potential violations. In recent
years, these advocates have been working with DLSE on the
establishment of an "enforcement protocol" that would outline
DLSE's formal policy for investigating and enforcing violations
of Labor Code Section 2810.
The 2008-09 Budget Act contained Supplemental Report Language as
follows:
"Labor Code 2810 Violation Protocol. To the extent
possible, the department shall update the Legislature at
budget hearings on (a) the number of time violations of
Labor Code 2810 were pursued, (b) the number of times
violations of Labor Code 2810 were suspected but not
pursued, (c) the justification for not pursuing potential
violations, and (d) any suggested changes to the proposed
protocol."
This bill is sponsored by the California Rural Legal Assistance
Foundation (CRLAF). CRLAF states that the purpose of the bill
is to codify the investigation protocol adopted by DLSE
effective July 1, 2008. CRLAF argues that Labor Code Section
2810 is a powerful legal tool that allows DLSE to 'go up the
chain' in illegal under-funded contract situations to reach
those who actually set the terms of the contract, and to hold
them responsible (along with the contractors) for the labor law
violations which flowed from the contract. CRLAF contends that
codification of the protocol will send an important message to
unscrupulous employers in the five targeted industries that
California intends to vigorously enforce its labor laws, and
that it will reach past labor contractor intermediaries to get
at the true authors of widespread wage-gouging in the
underground economy.
AB 1563
Page 4
REGISTERED SUPPORT / OPPOSITION :
Support
California Applicants' Attorneys Association
California Rural Legal Assistance Foundation (sponsor)
National Employment Law Project
Worksafe
Opposition
None on file.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091