BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 197|
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THIRD READING
Bill No: AB 197
Author: Monning (D)
Amended: 6/2/11 in Senate
Vote: 21
SENATE LABOR & INDUSTRIAL REL. COMMITTEE : 4-2, 6/8/11
AYES: Lieu, DeSaulnier, Leno, Yee
NOES: Wyland, Runner
NO VOTE RECORDED: Padilla
ASSEMBLY FLOOR : 48-22, 5/5/11 - See last page for vote
SUBJECT : Recovery of wages: liquidated damages
SOURCE : California Rural Legal Assistance Foundation
DIGEST : This bill increases 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.
ANALYSIS :
Existing law:
1. 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.
2. Establishes the Industrial Wage Commission to, among
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other duties, review the adequacy of the minimum wage
every two years.
3. Permits an individual to seek recovery of the unpaid
balance of the minimum wage, including interest,
attorney fees, and costs of the suit.
4. Requires that if an employee is found to have been paid
less than the minimum wage, that employee must be paid
liquidated damages in an amount that is equal to the
wages unlawfully unpaid, plus interest. Existing Civil
Code sets the interest rate at 10 percent.
5. Provides that if an employer demonstrates to the
satisfaction of the court that the failure to pay the
minimum wage was in good faith and that the employer had
reasonable grounds for believing that the act or
omission was not a violation of minimum wage law or
regulations, the court may, in its discretion, refuse to
award liquidated damages or award a lesser amount of
liquidated damages to the employee.
This bill increases 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
The sponsor of this bill, the California Rural Legal
Assistance Foundation, 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
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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 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 University of California, Los
Angeles 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.
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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 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.
Prior Legislation
AB 1881 (Monning) of 2010 was nearly identical to this bill
and was vetoed by Governor Schwarzenegger. In his veto
message he stated in part, "the recoveries and penalties
are already available to employees and that there was
nothing indicating California's minimum wage law was
lacking."
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/9/11)
California Rural Legal Assistance Foundation (source)
California Conference Board of Amalgamated Transit Union
California Conference of Machinists
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California Labor Federation
California Nurses Association
California Official Court Reporters Association
California Teamsters Public Affairs Council
Engineers and Scientists of California
Golden Gate University, Women's Employment Rights Clinic
International Longshore and Warehouse Union
Labor and Employment Committee
Laborers International Union of North American
National Lawyer Guild
Professional and Technical Engineers, Local 21
SCOPE
UNITE HERE
United Food and Commercial Workers-Western States
Conference
Utility Workers Union Workers of America, Local 132
WORKSAFE, Inc.
OPPOSITION : (Verified 6/9/11)
Associated Builders and Contractors of California
Associated General Contractors of California
California Association for Health Services at Home
California Association of Bed and Breakfast Inns
California Association of Health Facilities
California Chamber of Commerce
California Farm Bureau Federation
California Framing Contractors Association
California Grocers Association
California Hospital Association
California Hotel & Lodging Association
California Retailers Association
Civil Justice Association of California
Western Electrical Contractors Association
Western Growers
ARGUMENTS IN SUPPORT : Proponents concur with the sponsor
of this bill stating 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. They state that
this bill is a response to the chronic underfunding of the
DLSE which inhibits its ability to detect, cite and collect
civil penalties for minimum wage violations, particularly
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in the underground economy. They assert that DLSE's
underfunding also significantly undercuts its ability to
collect unpaid wages.
The California Teamsters Public Affairs Council, amongst
others, argues that under existing law, in a court action
to recover wages unpaid for minimum wage, the court may
award liquidated damages equal to the amount of unlawfully
unpaid wages, plus interest. They also state this remedy
enhancement will promote compliance by California employers
with California's minimum wage requirements.
ARGUMENTS IN OPPOSITION : The Civil Justice Association
of California, the California Chamber of Commerce, the
Western Growers, California Framing Contractors
Association, and the California Hotel & Lodging
Association, amongst others, strongly oppose this bill
stating that the current availability of liquidated damages
for minimum wage violations, let alone any expansion of
them, is unjustified and oppressive. They state that
liquidated damages are a type of punitive damages that may
be awarded in addition to the underpaid wages owed interest
on the underpaid wages and statutory penalties per pay
period that employers must pay to make an employee whole.
Finally, they argue that California's employers are already
subject to an expansive number of wage and hour laws,
regulations and substantial penalties for each.
ASSEMBLY FLOOR :
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Chesbro, Davis,
Dickinson, Eng, Feuer, Fong, Fuentes, Gatto, Hall,
Hayashi, Roger Hern�ndez, Hill, Huber, Hueso, Huffman,
Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning,
Pan, Perea, V. Manuel P�rez, Portantino, Skinner,
Solorio, Swanson, Torres, Wieckowski, Williams, Yamada,
John A. P�rez
NOES: Achadjian, Conway, Cook, Donnelly, Fletcher, Grove,
Hagman, Halderman, Harkey, Jeffries, Knight, Logue,
Mansoor, Miller, Morrell, Nestande, Norby, Olsen, Silva,
Smyth, Valadao, Wagner
NO VOTE RECORDED: Bill Berryhill, Cedillo, Furutani,
Galgiani, Garrick, Gordon, Gorell, Jones, Nielsen,
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Vacancy
PQ:do 6/9/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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