BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: June 13, 2012 20011-2012 Regular
Session
Consultant: Alma Perez Fiscal:No
Urgency: No
Bill No: AB 2099
Author: Cedillo
As Introduced/Amended: February 23, 2012
SUBJECT
Employment: wage and hour violations
KEY ISSUE
Should the Legislature increase a penalty currently imposed on
employers for violation of wage and hour laws from $100 to $250?
PURPOSE
To increase an existing wage and hour penalty to serve as a
better disincentive for employers to violate the law.
ANALYSIS
Existing law states that every employer or other person acting
either individually or as an officer, agent, or employee of
another person is guilty of a misdemeanor and is, punishable by
a fine of not less than $100 or by imprisonment for not less
than 30 days, or by both, who does any of the following:
1. Requires or causes any employee to work for longer hours
than those fixed, or under conditions of labor prohibited
by an order of the Industrial Welfare Commission (IWC).
2. Pays or causes to be paid to any employee a wage less
than the minimum fixed by an order of the IWC.
3. Violates or refuses or neglects to comply with specified
provisions of the law or any order or ruling of the IWC.
Existing law establishes the Division of Labor Standards
Enforcement (DLSE), within the Department of Industrial
Relations (DIR), for the enforcement of labor laws. The Labor
Commissioner is appointed by the Governor to serve as Chief of
DLSE. Existing law provides the Labor Commissioner with the
authority to investigate employee complaints and hold a hearing
in any action to recover wages, including orders of the
Industrial Welfare Commission. The Labor Commissioner may
require an award in the amount of the wages owed, plus interest.
(Labor Code �98 & 98.2 and Civil Code � 3289)
This Bill would increase the fine for a violation of these
provisions from not less than one hundred dollars ($100) to not
less than two hundred fifty dollars ($250).
COMMENTS
1. Background and Need for this bill?
The California Labor Code promotes and develops the welfare of
the wage earners of the state to improve their working
conditions and to advance their opportunities for profitable
employment. It is the duty of the Industrial Welfare
Commission to ascertain the wages paid to all employees in the
state, the hours and conditions of employment in the various
occupations, trades and industries. (Labor Code �1173)
Existing law establishes various requirements on employers
regarding the wages and hours of their workers, even imposing
misdemeanor charges for failure to pay the minimum wage as per
the Industrial Welfare Commission wage orders. (Labor Code
�1199)
Under existing law, the Division of Labor Standards
Hearing Date: June 13, 2012 AB 2099
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Enforcement is charged with the responsibility of 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 with minimum
labor standards. (Labor Code �90.5)
Although existing law provides various specific wage and hour
requirements on employers - and penalties for violations of
these, studies continue to show that a high number of workers
are paid less than the legally required minimum wage and are
often owed payment for hours of overtime worked. The author
believes that current monetary penalties serve as an
inadequate disincentive for wage and hour violations by
employers. Existing laws sets a fine of $100 for employers
who either require employees to work longer than fixed hours,
work under conditions prohibited by an order of the IWC, pay
employees less than minimum wage, or neglect to comply with
provisions of the Labor Code. This bill would increase that
penalty from $100 to $250 to discourage employers from
violating wage and hour laws.
2. Studies on Wage Theft:
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 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 noted 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,
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Senate Committee on Labor and Industrial Relations
and retail and grocery stores, have rates of 20 to 25 percent.
A 2010 follow-up study by the UCLA Institute for Research on
Labor and Employment, titled Wage Theft and Workplace
violations in Los Angeles: The Failure of Employment and Labor
Law for Low-Wage Workers, utilized the data from the 2008
survey but focused specifically on Los Angeles County. This
study focused on 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 due to workplace violations, out of total annual
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.
3. Proponent Arguments :
According to the author, current monetary penalties serve as
an inadequate disincentive for employer wage and hour
violations. Proponents argue that in this economy, with so
many people out of work and employees desperate to keep their
jobs, some employers are taking advantage by asking employees
to work off the clock, to work for less than minimum wage, to
forego breaks, or even to volunteer at the workplace.
Unfortunately, they argue, the scarce resources for labor law
enforcement make it unlikely that a company will get caught
and the fines are too low to provide much of a disincentive.
This bill increases minimum fines from at least $100 to at
least $250. Proponents argue that an increase in fines for
these crimes is essential if prosecutors are to have the tools
they need to address the massive scale of wage theft that is
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involved in some of these cases. They argue that this change,
while modest, increases the cost of cheating workers out of
wages and thereby may discourage employers from skirting the
law.
4. Opponent Arguments :
Opponents argue that California has some of the most onerous
labor laws in the nation. They argue that it is difficult for
large employers, even those with dedicated legal counsel and
human resource departments, to accurately interpret wage and
hour laws. According to opponents, one prime example of the
challenge they face when trying to accurately comply with the
law, specifically with regard to hours worked and payment of
proper overtime rates, is determining who should be classified
as an exempt employee versus non-exempt employee or even an
employee versus an independent contractor. Opponents argue
that one misstep in classifying employees and an employer
could be faced with unpaid wage claims as well as the threat
of an increased statutory penalty under this bill.
Opponents further argue that the penalties in this bill may be
imposed simply on the basis that the employer "neglected" to
comply. They argue that "neglect" is one of the lowest civil
standards of liability to prove and requires no evidence of
actual intent to do harm. Accordingly, they argue, an
employer who is trying to comply with California's wage and
hour laws may still be subject to this statutory penalty if a
court ultimately determines the employer failed to comply with
a "duty" under the Labor Code or Wage Orders. Due to the risk
of liability and litigation under this existing provision of
the Labor Code, they oppose any increase in the statutory
penalty that may be imposed.
Finally, opponents argue that there is no evidence that a
stronger deterrent is needed in the Labor Code than those that
already exist. According to opponents, the Labor Code already
threatens employers with numerous statutory penalties for
violations of the same sections and Wage Orders to which this
bill would apply.
5. Prior Legislation :
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Senate Committee on Labor and Industrial Relations
AB 469 (Swanson) of 2011: Chaptered
AB 469 enacted the Wage Theft Prevention Act of 2011 which
increased penalties, bonding requirements, and notice
requirements on employers to strengthen existing disincentives
to violate wage law. Among other things, AB 469 provided that
in addition to being subject to a civil penalty, any employer
who pays or causes to be paid to any employee a wage less than
the minimum fixed by an order of the commission shall be
subject to paying restitution of wages to the employee.
Additionally, this bill made it a misdemeanor for an employer
to willfully violate specified wage statutes or orders, or
willfully fail to pay a final court judgment or final order of
the Labor Commissioner for wages due.
AB 2187(Arambula) of 2010: Vetoed by the Governor
AB 2187 would have increased criminal penalties for an
employer's willful failure to pay wages. That measure was
vetoed by Governor Schwarzenegger, who stated in his veto
message that he felt that existing law was sufficient.
SUPPORT
American Federation of State, County and Municipal Employees,
AFL-CIO
California Communities United Institute
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation
California Rural Legal Assistance Foundation
California State Association of Electrical Workers
California State Pipe Trades Council
California Teamsters Public Affairs Council
Coalition of California Utility Employees
Engineers and Scientists of California
International Longshore & Warehouse Union
International Union of Elevator Constructors
Professional and Technical Engineers, Local 21
State Building and Construction Trades Council of California
UNITE HERE!
Hearing Date: June 13, 2012 AB 2099
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Senate Committee on Labor and Industrial Relations
United Food and Commercial Workers Union, Western States Council
Voters Injured at Work
Western States Council of Sheet Metal Workers
OPPOSITION
Air Conditioning Trade Association
Associated Builders and Contractors of California
California Asian Pacific Chamber of Commerce
California Association of Bed and Breakfast Inns
California Association of Health Facilities
California Building Industry Association
California Chamber of Commerce
California Farm Bureau Federation
California Framing Contractors Association
California Grocers Association
California Hotel & Lodging Association
California Independent Grocers Association
California League of Food Processors
California Lodging Industry Association
California Manufacturers and Technology Association
California Retailers Association
Plumbing-Heating-Cooling Contractors Association of California
Redondo Beach Chamber of Commerce & Visitors Bureau
Western Electrical Contractors Association, Inc.
Hearing Date: June 13, 2012 AB 2099
Consultant: Alma Perez Page 7
Senate Committee on Labor and Industrial Relations