BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: June 23, 2010 2009-2010 Regular
Session
Consultant: Alma Perez Fiscal:Yes
Urgency: No
Bill No: AB 2187
Author: Arambula
Version: As amended March 24, 2010
SUBJECT
Employment: payment of wages.
KEY ISSUE
Should the Legislature impose a misdemeanor upon an employer who
willfully fails to pay wages due to an employee who is
discharged or resigns?
PURPOSE
To increase criminal penalties for employers who willfully fail
to pay wages due to an employee who resigns or is discharged.
ANALYSIS
Existing law establishes misdemeanor criminal penalties for
various violations of the Labor Code, including the willful
failure to pay wages due. Under existing law,
Termination: If an employer terminates an employee or
lays him/her off with no specific return date within the
normal pay period, all wages earned and unpaid are due and
payable immediately. (Labor Code 201)
Voluntary quit and provide more than 72 hours' notice:
All wages and accrued vacation earned but unpaid for an
employee who quits with more than 72 hours' notice to
his/her employer are due and payable on the last day of
work. (Labor Code 202)
Voluntary quit and provide less than 72 hours' notice:
All wages and accrued vacation earned but unpaid for an
employee who quits with less than 72 hours' notice to
his/her employer are due and payable not later than 72
hours after notice is given. The employee is entitled to
receive his/her final wage payment by mail if he/she so
requests and designates a mailing address. The date of the
mailing is considered the date of payment for purposes of
the 72 hour requirements.
Under existing law , an aggrieved employee has the right to
restitution for unpaid wages. Existing law also makes it a
misdemeanor, in addition to imposing civil penalties, for a
person or employer who, having the ability to pay, willfully
refuses to pay wages due to a current employee, an employee who
has resigned, or an employee who has been discharged.
This Bill would increase criminal penalties for an employer who
willfully fails to pay wages due to an employee who resigns or
is discharged. Specifically, this bill:
1. Establishes a misdemeanor penalty for an employer or
person who willfully fails to pay within 90 days of the
date wages are due, all wages due to an employee who has
been discharged or who has quit.
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 and unappealable, to pay all reasonable costs of
prosecution to the entity that prosecutes. "Conviction" is
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defined as a verdict of guilty or a plea of guilty or nolo
contendere.
5. Makes related legislative findings and declarations.
COMMENTS
1. Recent Enforcement Data in California and Need for this bill?
The mission of the Division of Labor Standards Enforcement
(DLSE) is to vigorously enforce minimum labor standards in
order to ensure employees are not required or permitted to
work under substandard unlawful conditions, and to protect
employers who comply with the law from those who attempt to
gain competitive advantage at the expense of their workers by
failing to comply with minimum labor standards. The Bureau of
Field Enforcement (BOFE), within the DLSE, is responsible for
investigation and enforcement of statutes covering child labor
laws, the requirement of employers to carry workers'
compensation insurance coverage, audits of payroll records,
collection of unpaid minimum wages, overtime and other unpaid
wages, as well as the issuance of civil and criminal
citations, among other things.
According to the 2008 Annual Report on the Effectiveness of
the BOFE, conducted by the Department of Industrial Relations,
in calendar year 2008, the BOFE conducted a total of 9,413
inspections, resulting in a total of 5,521 citations. The
largest single source of violations and citations was the
failure to carry workers' compensation insurance with 2,738
citations in 2008. The BOFE issued 135 citations for minimum
wage violations and 130 citations for overtime violations. In
comparison, in 2006, the BOFE issued only 32 citations for
minimum wage violations and 52 citations for overtime
violations. It is important, however, to consider that the
DLSE has fewer authorized positions for enforcement staff in
2010 than it had in 1980.
Existing Labor Code 216 states that, "In addition to any
other penalty imposed by this article, any person, or an
agent, manger, superintendent, or officer thereof is guilty of
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Senate Committee on Labor and Industrial Relations
a misdemeanor, who: a) Having the ability to pay, willfully
refuses to pay wages due and payable after demand has been
made." However, the author of the bill contends that current
criminal penalties are inadequate. This bill would create a
criminal penalty in Labor Code against an employer who, having
the ability to pay, willfully fails to pay all wages due to an
employee who has been discharged or who has quit within 90
days of the date of the wages being due. The bill would make
this violation a misdemeanor subject to specified fines and/or
up to 6 months in jail, as specified.
2. Recent Studies on the Prevalence of "Theft of Wages"
Various recent studies have highlighted concerns about alleged
widespread "theft of wages" in the Unites States and in
California, particularly in the underground economy. In 2009,
the Ford Foundation sponsored a study titled, "Broken Laws,
Unprotected Workers: Violation of Employment and Labor Laws in
America's Cities," which 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. More than two-thirds of the sampled workers
experienced at least one pay-related violation in the previous
work week. Assuming a full-time, full-year work schedule, the
study estimated that on average workers lost $2,634 annually
(out of total earnings of $17,616) due to workplace
violations.
A separate study conducted by UCLA in 2010 titled, "Wage Theft
and Workplace Violations in Los Angeles," focused on a survey
of 1,815 workers in Los Angeles County and 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
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Senate Committee on Labor and Industrial Relations
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. This survey estimated that, in a given week,
654,914 workers in Los Angeles County suffer at least one
pay-based violation. The authors of the UCLA study underscored
the economic impact of these violations as follows:
"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."
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.
3. Proponent Arguments :
According to the author, there is substantial evidence of
widespread theft of wages in California, particularly in the
underground economy. Proponents argue that recent studies
(UCLA, "Wage Theft and Workplace Violations in Los Angeles,"
2010 and Ford Foundation, "Broken Laws, Unprotected Workers,"
2009) have found that more than one quarter of all workers
surveyed were not being paid the minimum wage. Unfortunately,
proponents argue, in spite of these numbers, in 2008, the
Division of Labor Standards Enforcement cited just 265
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employers in the entire state for violations of minimum wage
or overtime laws. And in 2009, only 216 employers in the
entire state of California were cited for violating minimum
wage or overtime pay laws assessing a total of $650,550 in
penalties for these violations, of which only $230,154 was
collected.
Proponents argue that in addition to inadequate enforcement,
the penalties for violations are insufficient to create a
deterrent. Proponents also argue that in our current economy,
where workers are desperate to keep their jobs, many employers
assume there is little risk of getting caught and little to
lose if they do. Proponents believe that without a strong
economic disincentive, wage theft will only expand and workers
will continue to be cheated out of the wages they have earned.
According to proponents, this bill closes a loophole in
California criminal law that allows an unscrupulous employer
to refuse to pay wages that are due by making it a crime for a
person who "having the ability to pay, willfully fails to pay
all wages due" to an employee who has been discharged or has
quit within 90 days of the date that those wages became due.
In addition, proponents argue that the language in this bill
is almost identical to language contained in Labor Code 216,
which the California Supreme Court found to be constitutional
in 1948 (In re Trombley, 1948, 31 Cal 2d 801). Proponents
and the author believe that this bill 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.
4. Opponent Arguments :
Opponents 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.
Opponents argue that, for example, if an employer and employee
disagree over the amount of wages due, a Labor Commissioner
determination could take longer than 90 days.
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Senate Committee on Labor and Industrial Relations
Opponents also argue that this bill could also be construed to
criminalize almost any wage-based lawsuit, such as overtime
and meal and rest period class actions, that might affect
whether an employee was paid "all wages due" at the end of
employment. According to opponents, 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.
Opponents argue that the threat of criminal prosecution under
this bill could unfairly force an employer to drop an
otherwise reasonable defense against a civil action.
Furthermore, opponents are concerned 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. They argue that 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
arguing that existing law already 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.
SUPPORT
California Rural Legal Assistance Foundation - Sponsor
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation
California Nurses Association/National Nurses Organizing
Committee
California Teamsters Public Affairs Council
Central California Legal Services, Inc.
Engineers and Scientists of California, IFPTE Local 20
International Longshore and Warehouse Union
Jockeys' Guild
Professional and Technical Engineers, IFPTE Local 21
United Food and Commercial Workers Region 8 States Council
UNITE-HERE!
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Senate Committee on Labor and Industrial Relations
OPPOSITION
Associated General Contractors
Automotive Aftermarket Industry Association
California Automotive Wholesalers' Association
California Chamber of Commerce
California Chapter of the American Fence Association
California Construction and Industrial Materials Association
California Employment Law Council
California Farm Bureau Federation
California Fence Contractors' Association
California Framing Contractors Association
California Grocers Association
California Hospital Association
California Independent Grocers Association
California Restaurant Association
California Retailers Association
Construction Employers' Association
Engineering Contractors' Association
Flasher/Barricade Association
Independent Waste Oil Collectors and Transporters Association
Marin Builders' Association
Motion Picture Association of America
Western Electrical Contractors Association
Western Growers Association
* * *
Hearing Date: June 23, 2010 AB 2187
Consultant: Alma Perez Page 8
Senate Committee on Labor and Industrial Relations