BILL ANALYSIS
AB 1881
Page 1
ASSEMBLY THIRD READING
AB 1881 (Monning)
As Introduced February 16, 2010
Majority vote
LABOR & EMPLOYMENT 4-2
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|Ayes:|Swanson, Furutani, |
| |Monning, Yamada |
| | |
|-----+--------------------------|
|Nays:|Niello, Gaines |
| | |
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SUMMARY : Increases the amount of liquidated damages that an
employee is entitled when recovering wages that were unlawfully
unpaid. Specifically, this bill increases, to two times the
wages unlawfully unpaid and interest thereon, the amount of
liquidated damages that may be awarded to an employee when an
employer fails to pay minimum wage.
EXISTING FEDERAL LAW establishes the Fair Labor Standards Act of
1938, which sets a federal minimum wage, with specified
exceptions.
EXISTING STATE LAW :
1)Sets a minimum wage for the state, with limited exceptions.
2)Prohibits employers, unless specified, from paying less than
the state minimum wage.
3)Permits an individual to sue his or her employer for
liquidated damages in an amount that is equal to the wages
unlawfully unpaid when the employer pays that individual less
than the minimum wage.
FISCAL EFFECT : None
COMMENTS : This measure is sponsored by the California Rural
Legal Assistance Foundation (CRLAF), who argues that there is
substantial evidence of widespread minimum wage violations in
California, particularly in the underground economy.
AB 1881
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Recent studies have highlighted concerns about alleged
widespread minimum wage violations in the United States and in
California, particularly in the underground economy. For
example, in 2009 the Ford Foundation sponsored a study that
surveyed 4,387 workers in low-wage industries in the three
largest U.S. cities - Chicago, Los Angeles and New York City.
The study revealed that 26% of workers in the sample were paid
less than the legally required minimum wage, and 60% of these
workers were underpaid by more than $1 per hour. In addition,
76% of the respondents who worked overtime in the previous week
were not paid the legally required overtime rate by their
employers.
The study also noted that minimum wage violation rates vary
significantly by industry, and occupation. For example, some
industries, such as apparel and textile manufacturing and
personal and repair services have minimum wage violation rates
that exceed 40%, while others, including restaurants, and retail
and grocery stores, have rates of 20 to 25%. Industries with
the lowest rates of minimum wage violations, including
construction and home health care, have rates of 12 to 13%.
Violation rates among occupations ranges from 66% in childcare
workers, to 21% for cashiers.
CRLAF writes that this bill is a response to the chronic
underfunding of the Division of Labor Standards Enforcement
(DLSE) which inhibits its ability to detect, cite and collect
civil penalties for minimum wage violations, particularly in the
underground economy. They assert that DLSE's underfunding also
significantly undercuts its ability to collect unpaid wages.
CRLAF also notes that DLSE has fewer authorized enforcement
positions in 2010 than it had in 1980, and has a demonstrably
poor record of either citing minimum wage or overtime
violations, or collection civil penalty assessments for these
violations, both of which undercut the deterrent effect of the
Labor Codes civil penalty provisions. They argue that there
needs to be more done to increase the effectiveness of both
public and private enforcement of wage violations in California
and follow the lead of ten other states, including New Mexico,
Idaho, Michigan and Maine, that have enacted statutes that
provide for at least the same level of damages in unpaid wages
proposed in this bill.
AB 1881
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Opponents of this measure, including the California Chamber of
Commerce, the California Bankers Association, and the California
Farm Bureau Federation, argue that the mere availability of
liquidated damages, and this bill's attempt to expand them, are
unjustified and oppressive given that apart from liquidated
damages, employers must make the employee whole and pay a
substantial penalty. In addition, the opponents write that
California employers are already subject to an expansive number
of wage and hour laws and regulations and substantial penalties
for each.
Please see policy committee analysis for more detailed
background information.
Analysis Prepared by : Shannon McKinley / L. & E. / (916)
319-2091
FN: 0004223