BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: June 9, 2010 2009-2010 Regular
Session
Consultant: Gideon L. Baum Fiscal:No
Urgency: No
Bill No: AB 1881
Author: Monning
Version: As Introduced February 16, 2010
SUBJECT
Recovery of wages: liquidated damages.
KEY ISSUE
Should the Legislature double the liquidated damages that can be
awarded to an individual when his or her employer pays less than
the minimum wage?
PURPOSE
To increase liquidated damage amounts in order to encourage
minimum wage law compliance.
ANALYSIS
Existing law sets a minimum wage for all employees in
California, with limited exceptions, and prohibits employers,
unless specified, from paying less than the state minimum wage.
Existing law establishes the Industrial Wage Commission to,
among other duties, review the adequacy of the minimum wage
every two years.
Existing law permits an individual to sue his or her employer
for liquidated damages in an amount that is equal to the wages
unlawfully unpaid, plus interest, when the employer pays that
individual less than the minimum wage. Existing civil code sets
the interest rate at 10 percent.
This bill would increase the amount of liquidated damages that
may be awarded to an employee when an employer fails to pay
minimum wage to two times the wages unlawfully unpaid, plus
interest.
COMMENTS
1. Need for this bill?
The sponsor of this measure, the California Rural Legal
Assistance Foundation (CRLAF), believes that there is
substantial evidence of widespread minimum wage violations in
California, particularly in the underground economy. In
particular, they note a recent national study on labor law
violations, as well as a Los Angeles County-specific study on
labor law violations.
In 2008, the Ford Foundation sponsored a survey of 4,387
workers in low-wage industries in the three largest U.S.
cities: Chicago, Los Angeles and New York City. The report of
that survey, titled Broken Laws, Unprotected Workers:
Violations of Employment and Labor Laws in America's Cities,
revealed that 26 percent of workers in the sample were paid
less than the legally required minimum wage the prior work
week, and 60 percent of these workers were underpaid by more
than $1 per hour. In addition, 76 percent of the respondents
who worked overtime in the previous week were not paid the
legally required overtime rate by their employers.
The study also notes 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 percent, while others, including restaurants,
and retail and grocery stores, have rates of 20 to 25 percent.
However, the study found that undocumented immigrant women
were at the greatest risk of minimum wage violations. The
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study estimated that the workers in low-wage industries
Chicago, Los Angeles, and New York City lose more than $56.4
million per week due to labor law violations.
A follow-up study by the UCLA Institute for Research and Labor
and Employment was published earlier this year, and that study
utilized the data from the 2008 survey, but focused
specifically on Los Angeles County. This study, titled Wage
Theft and Workplace Violations in Los Angeles: The Failure of
Employment and Labor Law for Low-Wage Workers focused on a
survey results of 1,815 workers in Los Angeles County.
This study found similar results to the national survey:
almost 30 percent of the workers sampled were paid less than
the minimum wage in the prior work week, and 63.3 percent of
these workers were underpaid by more than $1 per hour.
Assuming a full-year work schedule, Los Angeles County survey
respondents lost an average of $2,070.00 annually out of total
earnings of $16,536.00. The study estimated that workers in
low-wage industries in Los Angeles County lose more than $26.2
million per week as a result of employment and labor law
violations.
Both of the studies make the same public policy
recommendations to address these issues, which included
strengthening government enforcement of existing employment
and labor laws and stiffening the penalties.
2. Current Enforcement Activities in California:
The Bureau of Field Enforcement (BOFE) within the Division of
Labor Standards Enforcement (DLSE) investigates complaints and
takes enforcement actions to ensure employees are not being
required or permitted to work under unlawful conditions.
Enforcement action taken by BOFE investigators involves the
enforcement of child labor laws; the requirement of employers
to carry workers' compensation insurance coverage; audits of
payroll records, collection of unpaid minimum wages, overtime,
as well as prevailing and other unpaid wages; the issuance of
civil and criminal citations; the confiscation of illegally
manufactured garments; and injunctive relief to preclude
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further violations of the law.
In the calendar year 2009 (the most recent year for which data
is available); the BOFE conducted a total of 9,053
inspections, resulting in a total of 4,465 citations. The
largest single source of violations and citations was the
failure to carry workers' compensation insurance with 2,257
citations in 2009.
In 2009, the BOFE issued 113 citations for minimum wage
violations, fewer than the 135 citations issued in 2008. In
2006, the BOFE issued only 32 citations for minimum wage
violations.
3. Proponent Arguments :
As mentioned above, this measure is sponsored by the
California Rural Legal Assistance Foundation (CRLAF), who
argues that it will bring California into the mainstream with
other states that have recently increased damages paid to
workers when their employers cheat them out of the state's
respective minimum wages.
CRLAF 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.
4. Opponent Arguments :
Opponents of this measure, which includes the California
Chamber of Commerce, the California Association of Health
Facilities, and the California Bankers Association, argue that
the mere availability of liquidated damages, and this bill's
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Senate Committee on Labor and Industrial Relations
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.
Additionally, the California Department of Industrial
Relations is also in opposition to AB 1881. The Department
argues that there is no evidence to show that existing
statutory provisions for minimum wage violations are
insufficient, or that doubling the liquidated damages would
increase compliance with the law.
5. Prior Legislation :
AB 1835 (Lieber), Statutes of 2006, Chapter 230, sets the
minimum wage at $7.50 per hour as of January 1, 2007 and $8.00
per hour as of January 1, 2008.
SUPPORT
California Rural Legal Assistance Foundation - Sponsor
American Federation of State, County and Municipal Employees
California Labor Federation
California Rural Legal Assistance Foundation
National Lawyers Guild
OPPOSITION
Acclamation Insurance Management Services
California Association of Health Facilities
California Bankers Association
California Chamber of Commerce
California Chapter of the American Fence Association
California Department of Industrial Relation
California Farm Bureau Federation
California Fence Contractors Association
California Framing Contractors Association
California Grocers Association
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Senate Committee on Labor and Industrial Relations
California Independent Grocers Association
California Manufacturers and Technology Association
California Restaurant Association
California Retailers Association
Civil Justice Association of California
Department of Industrial Relations (DIR)
Engineering Contractors Association
Flasher/Barricade Association
Independent Waste Oil Collectors
Marin Builders' Association
Ventura County Agricultural Association
Western Electrical Contractors Association
Western Growers
* * *
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Senate Committee on Labor and Industrial Relations