BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: April 14, 2010 2009-2010 Regular
Session
Consultant: Alma Perez Fiscal:Yes
Urgency: No
Bill No: SB 1267
Author: Aanestad
Version: As introduced February 19, 2010
SUBJECT
Labor violations: penalties: exceptions.
KEY ISSUE
Should the Legislature allow for the waiver of penalties against
employers for first time offenders who violate specific labor
laws?
Should penalties be waived for an employer who violates the laws
pertaining to wage deduction statement requirements, the
employment of minors requirements, and workers' compensation
attainment because (1) the employer employs 15 or fewer
employees, (2) the employer has never violated these laws
before, and (3) the employer can show proof of compliance?
Should employers who employ minors against what current law
allows, be given an infraction as opposed to a misdemeanor for
this offense?
PURPOSE
To establish an avenue where employers meeting specified
criteria can receive a waiver of penalties assessed for
violations of specified labor laws.
ANALYSIS
Existing law provides penalties for violating certain
requirements relating to employment, including the requirements
for an employer to provide wage deduction statements, the
requirement for an employer to carry workers' compensation
insurance, and requirements relating to the employment of
minors.
Existing law requires every employer in the state to furnish
each of his or her employees, either as a detachable part of the
check, draft or voucher paying the employee's wages, or
separately when wages are paid by personal check or cash, an
accurate itemized statement in writing showing specified
information that includes, among others, the following:
Gross wages earned and net wages earned;
Total hours worked by the employee, except for any
employee whose compensation is solely based on a salary and
who is exempt from payment of overtime, as specified;
The number of piece-rate units earned and any applicable
piece rate if the employee is paid on a piece-rate basis;
All deductions, as specified;
The name and address of the legal entity that is the
employer.
Existing law requires that a copy of the statement or record of
the deductions be kept on file by the employer for at least
three years, as specified. Existing law also requires employers
to afford current and former employees the right to inspect or
copy these records. Under existing law, if upon inspection or
investigation, the Labor Commissioner determines that an
employer is in violation of these requirements, the Labor
Commissioner may issue a citation to the employer.
Under existing law , minors under the age of 18 are subject to
California's child labor protections. The California Labor Code
defines "minor" as any person under the age of 18 years that is
required to attend school under the provision of the Education
Code, and includes minors under age six. Except in limited
circumstances defined in law, all minors under 18 years of age
employed in the state of California must have a permit to work.
Employers must have a "Permit to Employ and Work" on file and
available for inspection by school and labor officials at all
times.
Hearing Date: April 14, 2010 SB 1267
Consultant: Alma Perez Page 2
Senate Committee on Labor and Industrial Relations
Existing law prohibits any employer from employing a minor 15
years of age or younger for more than eight hours in one day of
24 hours, or more than 40 hours in one week, or before 7 a.m. or
after 7 p.m., except that from June 1 through Labor Day, a minor
15 years of age or younger may be employed for authorized hours,
as specified by law, until 9 p.m. in the evening.
Under existing law , any person who employs a minor, directly or
indirectly in violation of child labor laws, for more than a
specified period of time during a workday or a workweek is
guilty of a misdemeanor punishable by a fine of up to five
thousand dollars ($5,000), but not less than one thousand
dollars ($1,000), or imprisonment in the county jail for not
more than 60 days, or both. Any person who willfully violates
child labor laws, upon conviction, is subject to a fine of not
more than ten thousand dollars ($10,000) or imprisonment in the
county jail for not more than six months, or both.
This Bill would allow an employer to receive a waiver of
specified penalties for violation of labor laws pertaining to
wage deduction statements, the employment of minors, and
obtainment of workers' compensation insurance. Specifically,
this bill would:
With respect to current wage deduction statements and record
keeping requirements:
Provide that penalties bestowed upon an employer for
violations of these requirements must be waived if all of
the following circumstances exist:
o The employer employs 15 or fewer employees;
o The employer has not previously violated the
specified requirements; and
o The employer provides the Labor Commissioner
proof of compliance with the requirements in law
within 48 hours of issuance of a citation.
With respect to the employment of minors in violation of labor
laws:
Provide that penalties bestowed upon an employer for
violations of labor laws restricting the number of hours a
minor can work during a school day must be waived if all of
Hearing Date: April 14, 2010 SB 1267
Consultant: Alma Perez Page 3
Senate Committee on Labor and Industrial Relations
the following circumstances exist:
o The employer employs 15 or fewer employees;
o The employer has never previously violated
specified labor laws;
o The employer provides the director proof of
compliance with the requirements in law within 48
hours of the issuance of a citation.
In addition, for an employer that employs five (5) or
fewer employees and is found to have violated school day
work hour restrictions for minors, this bill would allow
the first violation to be considered an infraction - as
opposed to a misdemeanor as is current law - punishable by
a fine of not more than one hundred dollars ($100).
With respect to the current requirement in law that every
employer must have workers' compensation insurance, even if they
have only one employee:
Provide that penalties bestowed upon an employer for
violations of this requirement be waived if all of the
following circumstances exist:
o The employer employs 15 or fewer employees;
o The employer has never previously failed to
secure the payment of workers' compensation as
required by law;
o The employer provides the director proof of
the purchase of workers' compensation insurance
coverage within 48 hours of the issuance of the order.
COMMENTS
1. Need for this bill?
The Division of Labor Standards Enforcement (DLSE), within the
Department of Industrial Relations, is responsible for
vigorously enforcing 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
Hearing Date: April 14, 2010 SB 1267
Consultant: Alma Perez Page 4
Senate Committee on Labor and Industrial Relations
with minimum labor standards. The author of the measure
believes that many small business owners in the state lack the
education, or resources to hire trained staff knowledgeable
enough, in labor laws that is necessary to be able to comply
with the law and avoid fines and penalties. This bill would
help small businesses employers in such situations by
requiring the waiver of penalties against an employer with 15
or fewer employees who violates various specified labor laws
provided the employer never previously violated the law and
shows proof of compliance within 48 hours of the issuance of
the penalty order.
2. Proponent Arguments :
According to the author, small "mom and pop" businesses are
the lifeblood of many California communities but,
unfortunately, these small business owners lack the education
on labor laws that is necessary to comply with the law and
avoid fines and penalties.
The author cites the example of a small business owner who was
fined $1,000 after he let his mother watch his store for an
hour while he went to pick up supplies. According to the
author, this small business was penalized for not buying
workers' compensation insurance for his mother even though she
wasn't a store employee. The author cites a second example
where a restaurant owner was fined $2,000 for allowing his
16-year-old son to work a four-hour shift after school.
According to the author, this particular small business owner
was unaware that teens could work only three-hour shifts.
According to the author, the Department of Industrial
Relations lacks the manpower to educate small business
employers on the extensive and complex requirements in the
Labor Code, some so difficult only an attorney could interpret
them. The author argues that many small employers lack the
resources to retain labor law attorneys or to hire human
resources personnel, thus, subjecting them to job-killing
Hearing Date: April 14, 2010 SB 1267
Consultant: Alma Perez Page 5
Senate Committee on Labor and Industrial Relations
citations and fines aggressively applied by labor code
enforcers. The author explains that the small business owner
is left with the monumental task of self education to comply
with the massive set of regulations. The author believes that
this bill would allow small business owners to comply with the
law and correct violations promptly without oppressive
penalties that threaten the viability of small employers.
3. Opponent Arguments :
According to opponents of the measure, penalties exist to
create a financial disincentive for violating the law. This
bill would waive these penalties for small businesses that
have not had a previous violation of the same code section and
can demonstrate compliance going forward. Opponents argue
that this bill is nothing more than a "get out of jail free"
card for workers' rights violations. In addition, opponents
believe that this bill allows small businesses to cheat until
they get caught, pay no penalty for the wrongdoing, and reap
the benefit from the illegal acts.
Opponents contend that no meaningful correlation has been
found between an employer's size and whether that employer
will violate labor laws. They argue that eliminating the
Labor Commissioner's obligation to issue citations - following
a finding that these laws have been violated - based in part
on whether the employer employs fewer than 15 employees (or 5,
in the case of child labor) is a dangerous policy change that
is unsupported by any objective evidence that these employers
actually commit (or are likely to commit) fewer violations of
labor law than larger employers. In addition, opponents argue
that the additional criterion for a waiver of penalties - no
prior violations - is an equally unconvincing guarantor of
prior (or present or future) labor law compliance.
Opponents argue that the penalties are not simply to protect
workers, but to help fight the underground economy as well as
this industry puts law abiding companies out of business since
they cannot compete with companies that break the rules.
According to opponents, the Division of Labor Standards
Enforcement (DLSE) has fewer authorized positions today than
it had in 1980, which means it has an extremely limited
Hearing Date: April 14, 2010 SB 1267
Consultant: Alma Perez Page 6
Senate Committee on Labor and Industrial Relations
capacity to effectively enforce labor laws throughout a huge
state that has more than 1 million employers, 18 million
workers and a massive underground economy. Moreover,
opponents argue that given the persistent problems with DLSE's
internal accounting and administrative procedures with respect
to the collection of civil penalties, there is a serious
question whether DLSE could reliably always establish whether
any given employer has had a prior violation of a particular
labor law provision.
In addition, opponents are concerned that this bill would
provide a disincentive for employers to obtain workers'
compensation coverage and delay timely benefit delivery to an
injured worker whose employer is illegally uninsured. Some
opponents are also concerned that this measure would change
the charge of misdemeanor to an infraction for employing
students during the school day and argue that we should be
encouraging students to get an education and should not be
making it easier for employers at the cost of students'
education.
Overall, opponents contend that neither employees'
occupational health and safety protections nor injured
workers' access to medical and indemnity benefits should ever
be compromised.
SUPPORT
None received to date.
OPPOSITION
American Federation of State, County and Municipal Employees,
AFL-CIO
California Applicants' Attorneys Association
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
California Federation of Teachers
California Labor Federation
California Nurses Association/National Nurses Organizing
Committee
California Rural Legal Assistance Foundation
Hearing Date: April 14, 2010 SB 1267
Consultant: Alma Perez Page 7
Senate Committee on Labor and Industrial Relations
California State Pipe Trades Council
California Teachers Association
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
Service Employees International Union (SEIU)
State Association of Electrical Workers
United Food and Commercial Workers Region 8 States Council
UNITE-HERE!
Western State Council of Sheet Metal Workers
Hearing Date: April 14, 2010 SB 1267
Consultant: Alma Perez Page 8
Senate Committee on Labor and Industrial Relations