BILL ANALYSIS
AB 2187
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Date of Hearing: April 7, 2010
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Sandre Swanson, Chair
AB 2187 (Arambula) - As Amended: March 24, 2010
SUBJECT : Employment: payment of wages.
SUMMARY : Increases criminal penalties for willful failure to
pay wages. Specifically, this bill :
1 Establishes a misdemeanor penalty for an employer or person
who willfully fails to pay all wages due to an employee who
has been discharged or who has quit within 90 days of the date
wages are due.
2)Makes the aforementioned misdemeanor punishable by a fine of
not less than $1,000 and not more than $10,000, or by
imprisonment in a county jail for not more than six months, or
both.
3)Requires an employer found guilty of the aforementioned
misdemeanor to pay, in addition to any criminal fines,
restitution to the aggrieved employee in an amount equal to
the total amount of unpaid wages.
4)Requires an employer or person, upon conviction becoming
final, to pay all reasonable costs of prosecution to the
entity that prosecutes. "Conviction" is defined as a verdict
of guilty or a plea of guilty or nolo contendere.
5)Makes related legislative findings and declarations.
EXISTING LAW establishes misdemeanor criminal penalties for
various violations of the Labor Code, including the willful
failure to pay wages due.
FISCAL EFFECT : Unknown
COMMENTS :
This measure is sponsored by the California Rural Legal
Assistance Foundation (CRLAF), who argues that it will
appropriately strengthen the hands of prosecutors who take on
theft of wages cases in the future, and will make certain that
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restitution of all unpaid wages to aggrieved employees is
central to these prosecutions.
Existing law establishes misdemeanor criminal penalties for
various violations of the Labor Code, including the willful
failure to pay wages due (See, e.g., Labor Code section 216).
However, for the reasons discussed below, the sponsor contends
that these current criminal penalties are inadequate.
Moreover, Penal Code section 532(a) provides as follows:
"Every person who knowingly?defrauds any other person of
money, labor, or
property...and thereby fraudulently gets possession of
money or property, or
obtains the labor or service of another, is punishable in
the same manner and
to the same extent as for larceny of the money or property
so obtained."
California is one of only a handful of states that includes
"labor" within its definition of theft<1>. Despite this fact,
worker advocates contend that "theft of labor" is rarely, if
ever, prosecuted as a crime. Potential reasons for the lack of
criminal prosecution include, but are not limited to, the
following: (1) an assumption that "theft of labor" is a civil
matter best handled by the Labor Commissioner; (2) the
underreporting of wage theft for a variety of reasons; (3) the
fact that "theft of labor" requires proof of specific intent and
must be proven beyond a reasonable doubt; and (4) heavy caseload
of local prosecutors resulting in prioritization of other cases.
Recent Studies on the Prevalence of "Theft of Wages"
Various recent studies have highlighted concerns about alleged
widespread "theft of wages" in the United States and in
California, particularly in the underground economy.
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<1> Rita J. Verga, An Advocate's Toolkit: Using Criminal "Theft
of Service" Laws to Enforce Workers' Right to Be Paid, 8 N.Y.
City L. Rev. 283 (2005) at n. 4.
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For example, in 2009 the Ford Foundation sponsored a study<2>
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 percent of workers in the sample were
paid less than the legally required minimum wage, 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.
Another study<3> focused on a survey of 1,815 workers in Los
Angeles County. The survey found that low-wage workers in Los
Angeles regularly experience violations of basic laws that
mandate a minimum wage and overtime pay and are frequently
forced to work off the clock or during their breaks. Other
violations documented in the survey include lack of required
payroll documentation, being paid late, tip stealing and
employer retaliation.
The survey also revealed that the various forms of nonpayment
and underpayment of wages take a heavy monetary toll on workers
and their families. Respondents who experienced a pay-based
violation in the previous work week lost an average of $39.81
out of average weekly earnings of $318.00 (or 12.5 percent).
Assuming a full-year work schedule, these workers lost an
average of $2,070.00 annually out of total earnings of
$16,536.00<4>.
The survey estimated that, in a given week, 654,914 workers in
Los Angeles County suffer at least one pay-based violation.
Extrapolating from this figure, front-line workers in low-wage
industries lose more than $26.2 million per week as a result of
employment and labor law violations<5>.
The authors of the report underscored the economic impact of
these violations as follows:
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<2> "Broken Laws, Unprotected Workers: Violations of Employment
and Labor Laws in America's Cities." Center for Urban Economic
Development, National Employment Law Project, UCLA Institute for
Research on Labor and Employment (2009).
<3> Milkman, Ruth, Ana Luz Gonzalez and Victor Narro. "Wage
Theft and Workplace Violation in Los Angeles: The Failure of
Employment and Labor Law for Low-Wage Workers." UCLA Institute
for Research on Labor and Employment (2010).
<4> Id . at 4.
<5> Id . at 53.
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"Wage theft not only depresses the already meager earnings
of low-wage workers,
it also adversely impacts their communities and the local
economies of which they
are part. Low-income families spend the bulk of their
earnings on basic necessities
like food, clothing and housing. Their expenditures
circulate through local economies,
supporting businesses and jobs. Wage theft robs local
communities of this spending
and ultimately limits economic growth<6>."
Both of the aforementioned studies make the following public
policy recommendations to address these issues: (1) strengthen
government enforcement of existing employment and labor laws;
(2) update legal standards; and (3) establish equal status for
immigrants to ensure that they have the full protection and
remedies available under employment and labor laws.
Recent Enforcement Data in California
As a preliminary manner, it is important to note the impact of
the underground economy generally in California. In 2009, the
Economic and Employment Enforcement Coalition (EEEC) stated that
the underground economy in California has been conservatively
estimated to amount to over $6.5 billion in just unreported
taxable wage income every year (California's Tax Gap, 2005
California Legislative Analyst's Office). This $6.5 billion
figure significantly understates the problem given that it does
not fully take into consideration the failure of underground
businesses to fund the unemployment tax program, the workers'
compensation system, employer funded worker safety programs, and
similar programs<7>.
The Bureau of Field Enforcement (BOFE) within the Division of
Labor Standards Enforcement (BOFE) 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
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<6> Id . at 54.
<7> "Report to the California Joint Legislative Budget Committee
and Director of the California Department of Finance." Economic
and Employment Enforcement Coalition (September 2009).
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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 further
violations of the law.
In calendar year 2008 (the most recent year for which data is
available), the BOFE conducted a total of 9,413 inspections,
resulting in a total of 5,521 citations<8>. The largest single
source of violations and citations was the failure to carry
workers' compensation insurance with 2,738 citations in 2008.
In 2008, the BOFE issued 135 citations for minimum wage
violations and 130 citations for overtime violations, or 265
citations for the two categories combined. By comparison, in
2008 the BOFE issued 274 citations to car washes for failure to
register and 392 citations for child labor violations<9>.
In 2006, the BOFE issued only 32 citations for minimum wage
violations and 52 citations for overtime violations<10>.
ARGUMENTS IN SUPPORT
As mentioned above, this measure is sponsored by the California
Rural Legal Assistance Foundation (CRLAF), who argues that it
will appropriately strengthen the hands of prosecutors who take
on theft of wages cases in the future, and will make certain
that restitution of all unpaid wages to aggrieved employees is
central to these prosecutions.
CRLAF points out that he Division of Labor Standards Enforcement
(DLSE) has fewer authorized positions for enforcement staff in
2010 than it had in 1980, and has a demonstrably poor record of
either citing for minimum wage or overtime violations or
collecting civil money penalty assessments for these violations,
both of which undercut the deterrent effect of the Labor Code's
civil penalty provisions. CRLAF states that in 2008, only 265
employers in the entire state of California were cited for
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<8> "2008 Annual Report on the Effectiveness of the Bureau of
Field Enforcement." Department of Industrial Relations (DIR).
<9> Id . at 2.
<10> "2006 Annual Report on the Effectiveness of the Bureau of
Field Enforcement." Department of Industrial Relations (DIR).
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violating minimum wage or overtime pay laws. DLSE assessed
$884,373 in penalties for these violations but collected only
$261,520 (less than 30 cents on the dollar).
CRLAF notes that various provisions of the Labor Code make it a
misdemeanor to fail to comply with wage payment laws. However,
CRLAF argues that none of these statutes: 1) impose any
additional criminal sanctions if an unscrupulous employer fails
to pay wages that are due within a reasonable period of time; 2)
impose a significant minimum fine for such misconduct; 3)
require restitution to the employee of all unpaid wages; or 4)
require a guilty party to pay the reasonable costs of a
successful prosecution. In addition, CRLAF states that various
provisions of the California Constitution and the Penal Code
contain "victim's rights" restitutionary protections including a
mandatory "restitution fine" (for misdemeanor convictions,
ranging from not less than $100 to not more than $1,000) and
mandatory "full restitution" for an injured victim, but in both
instances a court has discretion not to assess any fine or not
to order full restitution if it finds that there are "compelling
and extraordinary" reasons to do so and states them on the
record.
Therefore, CRLAF contends that this bill addresses each of the
four weaknesses identified in the Labor Code's provisions by: 1)
making it a misdemeanor to fail to pay wages due, within 90
days, to an employee who quits or is discharged; 2) setting a
minimum fine of $1,000 and a maximum fine of $10,000 for this
violation; 3) requiring, in addition to the fine, full
restitution to each employee equal to the total amount of wages
not paid; and 4) requiring payment of prosecution costs.
ARGUMENTS IN OPPOSITION
Opponents, including the California Chamber of Commerce, argue
that this bill could make into criminals employers with
legitimate disputes over wage claims. They contend that the
term "willfully fails" is vague and undefined, so it could be
construed to apply to wage disputes that are often not resolved
until long after 90 days. For example, if an employer and
employee disagree over the amount of wages due, a Labor
Commissioner determination could take longer than 90 days.
Opponents also argue that this bill could also be construed to
criminalize almost any wage-based lawsuit, such as overtime and
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meal and rest period class actions, that might affect whether an
employee was paid "all wages due" at the end of employment.
These lawsuits have statutes of limitation from one to three or
more years and could also be pending in the courts for years in
appeals. The threat of criminal prosecution under this bill
could unfairly force an employer to drop an otherwise reasonable
defense against a civil action.
Moreover, opponents express concern that jail time and fines
could be imposed against individual employees who were following
the directions of the employer since the employer's "agents" and
"employees" are subject to liability under this bill. This
might include all the employees in the payroll department and
all the way up the supervisorial chain.
Finally, opponents question the necessity of this bill, since
existing law requires the employer to make the employee whole
and imposes stiff penalties of varying amounts, depending on the
wage dispute at issue, when the employer fails to pay wages due.
Moreover, current criminal laws outlaw theft, which permits
prosecution of ill-intentioned employers who steal money from
their employees.
REGISTERED SUPPORT / OPPOSITION :
Support
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation, AFL-CIO
California Nurses Association/National Nurses Organizing
Committee
California Rural Legal Assistance Foundation (sponsor)
California Teamsters Public Affairs Council
Engineers and Scientists of California, IFPTE Local 20
International Longshore and Warehouse Union
Jockeys' Guild
Professional and Technical Engineers, IFPTE Local 21
UNITE HERE!
United Food and Commercial Workers Region 8 States Council
Opposition
California Chamber of Commerce
California Construction and Industrial Materials Association
California Employment Law Council
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California Farm Bureau Federation
California Framing Contractors Association
California Grocers Association
California Hospital Association
California Independent Grocers Association
California Retailers Association
Western Electrical Contractors Association
Western Growers Association
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091