BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: June 9, 2010 2009-2010 Regular
Session
Consultant: Alma Perez Fiscal:No
Urgency: No
Bill No: AB 2772
Author: Assembly Committee on Labor and Employment
Version: As Amended April 8, 2010
SUBJECT
Labor Commissioner: appeals.
KEY ISSUE
Should an employer wishing to appeal a Labor Commissioner
decision with the superior court be required to first post a
bond in the amount of the judgment rendered in the
administrative hearing?
PURPOSE
To specify that an employer wishing to appeal an administrative
judgment must first post a bond.
ANALYSIS
Existing law authorizes the Labor Commissioner (LC) to
investigate employee complaints and hold administrative hearings
to decide disputes over unpaid wages and other issues between
employers and employees. The Labor Commissioner is appointed by
the Governor to serve as Chief of the Division of Labor
Standards Enforcement (DLSE). The DLSE and the Office of the
Labor Commissioner were established to adjudicate wage claims,
investigate discrimination and public works complaints, and
enforce Labor Code statutes and Industrial Welfare Commission
orders.
Existing law permits a party who loses at an administrative
hearing conducted by the Labor Commissioner to file an appeal
within ten days in superior court. An employer filing an appeal
with the superior court must post a bond with the court in the
amount of the order, decision, or award rendered in the
administrative hearing. The employer is required to provide
written notification to the other parties and the Labor
Commissioner of the posting of the bond.
Under existing law , the undertaking is posted on the condition
that if any judgment is entered in favor of the employee, the
employer shall pay the amount owed pursuant to the judgment, and
if the appeal is withdrawn or dismissed without entry of
judgment, the employer shall pay the amount owed pursuant to the
order, decision, or award of the Labor Commissioner unless the
parties have executed a settlement agreement for payment of some
other amount, in which case the employer shall pay the amount
that the employer is obligated to pay under the terms of the
settlement agreement. If the employer fails to pay the amount
owed within 10 days of entry of the judgment, dismissal, or
withdrawal of the appeal, or the execution of a settlement
agreement, a portion of the undertaking equal to the amount
owed, or the entire undertaking if the amount owed exceeds the
undertaking, is forfeited to the employee.
This Bill would expressly state that as a condition to filing an
appeal of an administrative judgment, an employer must first
post a bond with the reviewing court.
COMMENTS
1. Need for this bill?
Committee has heard of a case in which the Labor Commissioner
awarded a client over $80,000.00 in unpaid wages and penalties
for years of work at rates below the minimum wage in September
2007. The defendant employer immediately appealed the
administrative decision to the Superior Court, but failed to
post the required bond. In order to seek dismissal of the
appeal under the process currently required (by Progressive
Concrete decision - see below), a motion was filed for an
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Senate Committee on Labor and Industrial Relations
order directing the defendant employer to post the required
bond. The court granted the motion and set a date by which
the employer was required to post the bond.
According to the legal services organization representing this
case, the employer failed to post the bond, but repeatedly
appeared in court to request more time. Ultimately, the court
set three successive deadlines, requiring three further court
hearings, for the employer to post the bond. When the
employer missed the final deadline, the court dismissed the
appeal and entered judgment in the amount of the Labor
Commissioner award. By the time the appeal was dismissed in
March 2008, more than six months had passed from the time of
the Labor Commissioner award. According to the legal services
organization representing this case, during these six months
the defendant employer transferred assets and shut down
operations of its business.
Current law says that whenever an employer files an appeal,
the employer shall post an undertaking with the reviewing
court; however, current law does not specify when this needs
to occur. This bill is needed to specify that as a condition
to filing an appeal with the superior court on a Labor
Commissioner decision, an employer must first post a bond in
the amount of the judgment rendered in the administrative
hearing.
2. Background on Labor Code Section 98.2 and AB 2509 (Steinberg)
of 2000:
Existing law authorizes employees (in lieu of filing a civil
proceeding) to file an administrative claim for unpaid wages
or similar damages with the Labor Commissioner. This is an
administrative adjudicatory process often referred to as the
"Berman hearing" process. Under current law, a losing party
may choose to appeal a Labor Commissioner decision to the
superior court. The appeal is heard by the superior court on
a "de novo" basis, meaning the appeal is heard "anew" as if
the original hearing had not taken place.
Prior to 2000, there were complaints by some worker advocates
that unscrupulous employers, particularly those in the
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Senate Committee on Labor and Industrial Relations
underground economy, were filing "frivolous" appeals of Labor
Commissioner decisions with the superior court in an effort to
drag out litigation and hide assets so that workers would not
be able to collect on judgment, even if ultimately successful
on appeal.
In response, AB 2509 (Steinberg) of 2000 added the current
language to Labor Code section 98.2(b) that specifies that
"Whenever an employer files an appeal pursuant to this
section, the employer shall post an undertaking with the
reviewing court in the amount of the decision, order, or
award." The Assembly floor analysis for AB 2509 (for the vote
on concurrence in Senate amendments, just preceding the final
vote on the bill) stated the following: "The remaining
provisions include those relating to: ?. Requiring an
undertaking prior to an appeal of a final wage order?"
3. The Progressive Concrete Decision
Despite the legislative history of AB 2509, in 2006 a
California appellate court determined that the requirements of
Labor Code section 98.2(b) are merely "directory" (and not
"mandatory and jurisdictional"). Progressive Concrete Inc.,
v. Parker, 136 Cal. App. 4th 540, 548 (2006).
As a practical matter, this means that when an employer fails
to post the required bond, a court may not simply dismiss the
appeal, but instead must first issue an order directing the
employer to post the bond. This also means that an employee
must generally retain counsel to file a motion for such an
order. If the employer disobeys the court order by failing to
post the bond, then the court may dismiss the appeal.
The court in Progressive Concrete reasoned that a "promptly
issued trial court order requiring an appealing employer to
post the undertaking by a certain date would have
substantially the same effect and thereby accomplish
the same legislative purpose" as permitting the court simply
to dismiss an appeal when no bond is posted. Id. at 548.
This bill would specify that an employer wishing to appeal an
adverse Labor Commissioner Order, Decision, or Award (ODA)
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Senate Committee on Labor and Industrial Relations
must first post a bond.
4. Proponent Arguments :
According to the author, Labor Code 98.2(b) was included in
AB 2509 (Steinberg) of 2000 in response to unscrupulous
employers who were avoiding paying off final Labor
Commissioner wage judgments by filing unwarranted, dilatory,
and expensive court appeals as a strategy to get workers to
walk away from valid wage claims. According to the author, a
recent California appellate court has held that the language
in this code section is merely "directory" and that a specific
court order is necessary before an employer can be required to
post the undertaking.
According proponents, this decision - which is binding on
Superior courts, state and local agencies, employees and
employers until contradicted by another appellate court or the
California Supreme Court - is plainly inconsistent with the
clear purpose behind enactment of Section 98.2(b). Proponents
argue that the effect of the appellate court's holding is to
leave entirely to the discretion of a court whether or not to
issue an order requiring the posting of the bond. In
addition, opponents argue that this ruling has provided an
avenue for unscrupulous employers to delay entry of judgment
by filing - at no cost - frivolous appeals of Labor
Commissioner awards that they have no intention of pursuing.
Furthermore, opponents argue that while such appeals may
ultimately be dismissed when employers fail to obey a court
order to post a bond, the delay has allowed defendants to hide
or transfer assets, resulting in uncollectible judgments and
no bond to cover the amount. According to proponents, this is
precisely the reason that Section 98.2(b) was included in AB
2509 in order to prevent employers from filing frivolous
appeals to avoid ever paying valid wage claims. The author
and proponents believe that this bill simply restores the
original purpose of AB 2509's employer appeal bond provision
to require the posting of the undertaking with the court as a
precondition to filing an appeal.
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Consultant: Alma Perez Page 5
Senate Committee on Labor and Industrial Relations
5. Opponent Arguments :
None received to date.
6. Prior Legislation :
AB 2509 (Steinberg) of 2000: Chaptered
This bill revised statutes relating to the administrative and
civil enforcement of wage and hour laws including wage
collection and enforcement procedures before the Labor
Commissioner.
SUPPORT
American Federation of State, County and Municipal Employees
Bet Tzedek Legal Services
California Labor Federation, AFL-CIO
California Rural Legal Assistance Foundation
OPPOSITION
None received to date.
* * *
Hearing Date: June 9, 2010 AB 2772
Consultant: Alma Perez Page 6
Senate Committee on Labor and Industrial Relations