BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Senator Ben Hueso, Chair
Date of Hearing: June 25, 2014 2013-2014 Regular
Session
Consultant: Deanna D. Ping Fiscal:Yes
Urgency: No
Bill No: AB 1723
Author: Nazarian
As Introduced: February 14, 2014
SUBJECT
Employees: wages.
KEY ISSUE
Should the legislature authorize the Labor Commissioner to
include "waiting time" penalties in wage citations?
ANALYSIS
Existing law authorizes the Labor Commissioner to investigate
and enforce statutes and orders of the Industrial Welfare
Commission that, among other things, specify the requirements
for the payment of wages by employers.
Existing law provides the Labor Commissioner with the authority
to investigate employee complaints and allows the Labor
Commissioner to 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)
Existing law allows the division or department to commence and
prosecute a civil action to recover unpaid minimum wages or
unpaid overtime compensation, including interesting thereon.
(Labor Code �1193.6)
Existing law provides that an employee who receives less than
the minimum wage is entitled to recover in a civil action, the
unpaid balance of the full amount of the minimum wage,
liquidated damages in an amount equal to the wages unlawfully
unpaid and interest thereon, reasonable attorney's fees and
costs of suit. (Labor Code �1194)
Existing law provides that, in a citation for a minimum wage
violation issued by the Labor Commissioner, an employer shall be
subject to a specified civil penalty and restitution of wages.
(Labor Code �1197.1)
Existing law provides that if an employer willfully fails to pay
any wages of an employee who is discharged or who quits, the
wages of the employee shall continue as a penalty from the due
date thereof at the same rate until paid or until an action
therefor is commenced; but the wages shall not continue for more
than 30 days. (Labor Code �203)
This bill provides that minimum wage citations issued by the
Labor Commissioner will also include any applicable "waiting
time" penalties provided for under existing law, as specified.
Specifically, this bill states that, in a citation by the Labor
Commissioner for failure to pay minimum wage, an employer who
fails to pay the minimum wage shall be subject to pay 'waiting
time' penalties - which under statute is defined as the wages of
an employee who is discharged or quits from the due date until
paid or until an action is commenced. The wages shall not
continue for more than 30 days.
COMMENTS
1. Need for this bill?
Under existing law, there are generally three main avenues
available under the Labor Code for the recovery of unpaid
minimum wages.
First, an employee may file an administrative wage claim with
the Labor Commissioner. (Labor Code Section 98). Existing
law provides for an administrative hearing process for the
adjudication of such claims, including wages, penalties, and
other demands for compensation, including liquidated damages.
Hearing Date: June 25, 1014 AB 1723
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Senate Committee on Labor and Industrial Relations
(Labor Code Section 98). These administrative hearings are
usually referred to as "Berman hearings."
Second, an employee may file a civil action to recover the
full amount of the minimum wage, including interest,
reasonable attorney's fees and costs of suit. (Labor Code
Section 1194). In such a civil action, an employee shall also
be entitled to liquidated damages in an amount equal to the
wages unlawfully paid. (Labor Code Section 1194.2).
Third, existing law authorizes the Labor Commissioner to issue
a citation for failure to pay the state minimum wage after an
inspection or investigation. (Labor Code Section 1197.1).
Existing law provides that the employer shall be subject to a
civil penalty, restitution of wages, and liquidated damages
payable to the employee. Existing law also provides for an
administrative hearing process for a person to contest a
citation or proposed assessment of civil penalties, wages and
liquidated damages. (Labor Code Section 1197.1).
Under a different provision of existing law, when an employer
willfully fails to pay any wages of an employee who is
discharged or who quits, the wages of the employee continue as
a penalty for up to 30 days. (Labor Code Section 203). These
wages are often referred to as "waiting time" penalties and
are generally designed to ensure the prompt payment of earned
wages. Actions to recover unpaid minimum wages often include
claims for "waiting time" penalties under Labor Code Section
203.
Under existing law, the Labor Commissioner lacks the statutory
authority to recover "waiting time" penalties as part of a
citation for a minimum wage violation. According to the
author's office, AB 1723 will ensure that workers have the
same monetary relief whether they pursue their claims
administratively, by the way of the courts, or via the Labor
Commissioner's existing authority as well as promoting the
prompt payment of owed wages.
2. Labor Code �203 and "Willfully" Defined
Hearing Date: June 25, 1014 AB 1723
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Senate Committee on Labor and Industrial Relations
According to Labor Code �203, an employer will be held
responsible for "waiting time" penalties if they willfully
fail to pay, without abatement or reduction, any wages of an
employee who is discharged or who quits. In the California
Code of Regulations, a definition of willfully is assigned to
this specific code section as well as the explanation that if
there is a good faith dispute that any wages are due will
preclude such penalties. The regulations state:
A willful failure to pay wages within the meaning of Labor
Code Section 203 occurs when an employer intentionally
fails to pay wages to an employee when those wages are due.
However, a good faith dispute that any wages are due will
preclude imposition of waiting time penalties under Section
203.
(a) Good Faith Dispute. A "good faith dispute" that any
wages are due occurs when an employer presents a defense,
based in law or fact which, if successful, would preclude
any recover on the part of the employee. The fact that a
defense is ultimately unsuccessful will not preclude a
finding that a good faith dispute did exist. Defenses
presented which, under all the circumstances, are
unsupported by any evidence, are unreasonable, or are
presented in bad faith, will preclude a finding of a "good
faith dispute."
(California Code of Regulations �13520)
Meaning, under AB 1743, a citation under �203 by an
investigator would require the investigator to find that the
employer intentionally failed to pay owed wages, and if
applicable presented a defense in bad faith as explicitly
referenced above. However, an employer under Labor Code
�1197.1(c)(1) may contest a citation or proposed assessment by
notifying the Labor Commissioner of his or her request for an
informal hearing.
2. Proponent Arguments :
Hearing Date: June 25, 1014 AB 1723
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Senate Committee on Labor and Industrial Relations
Proponents argue that AB 1723 will ensure that victims of wage
theft will recover any applicable "waiting time" penalties
when the Labor Commissioner issues a citation for a minimum
wage violation. Proponents argue that the Division of Labor
Standards and Enforcement currently lack the statutory
authority to recover application "waiting time" penalties
after a citation for a minimum wage violation. Proponents
maintain that without the legal authority to recover these
monetary penalties for workers as part of a BOFE/DLSE minimum
wage citation, state policy to ensure prompt payment of wages
is significantly undercut, and workers are denied all that is
due to them following a theft of their wages. Proponents also
argue that because the payment of 'waiting time' penalties,
where applicable, is mandatory, of the Labor Commissioner/BOFE
does not recover them when it cites for a minimum wage
violation, workers will simply file a subsequent "Berman
hearing" administrative claim or a civil action to recover
them. Proponents contend that these hearings will create
unnecessary and completely avoidable costs for DLSE, or the
courts, and will also result in possibly lengthy delays for
workers seeking to be made whole after theft of their wages.
3. Opponent Arguments :
Opponents argue that the expansion of the capacity of
investigators employed by the Labor Commission places
employers at a disadvantage because the establishment of
underpayments should remain under the purview of an
administrative hearing. Opponents note that during a hearing
the complaint, investigation, and the employer's documentation
are reviewed. Opponents contend that if the hearing process is
eliminated it is uncertain if the investigator will have the
same information. Opponents further state that the bill also
expands penalties, which include liquidated damages, which
elevates the need for a fair hearing to ensure employers have
equal protections under the law.
Opponents also suggest the inclusion of an amendment to ensure
that an investigator properly considers the heightened
standard of "willfulness" for purposes of imposing waiting
time penalties. Opponents requested AB 1723 be amended to
include that any citation must specify in writing the basis
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Senate Committee on Labor and Industrial Relations
for finding willfulness to justify an assessment of waiting
time penalties. Opponents argue that by specifying this
standard in writing, it will provide an employer with adequate
notice in order to assist the employer in determining whether
an appeal of the citation is necessary.
4. Prior Legislation :
AB 442 (Nazarian), Chapter 735, Statutes of 2013 - authorized
the Labor Commissioner to collect liquidated damages from an
employer who pays an employee less than minimum wage.
AB 240 (Bonilla), Chapter 272, Statutes of 2012 - amended
Labor Code sections 1194.2 and 98 to authorize the Labor
Commissioner to award unpaid minimum wage liquidated damages
in administrative wage claim hearings under the same
conditions that existed for allowing a court to award those
same damages to workers.
AB 469 (Swanson), Chapter 655, Statutes of 2011 - known as the
Wage Theft Prevention Act of 2011, the bill enacted several
anti-wage theft initiatives including extending the period
within which the division may commence a collection action
from one year to three years and in addition to being subject
to a civil penalty and makes it a misdemeanor if an employer
willfully violates specified wage statutes or orders, among
other provisions.
SUPPORT
California Rural Legal Assistance Foundation (Sponsor)
California Federation of Teachers, AFL-CIO
California Labor Federation, AFL-CIO
OPPOSITION
Air Conditioning Trade Association
Associated Builders and Contractors - San Diego Chapter
California Association for Health Services at Home
California Association of Licensed Security Agencies, Guards and
Associates
California Chamber of Commerce
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Senate Committee on Labor and Industrial Relations
California Farm Bureau Federation
California Pool and Spa Association
California Professional Association of Specialty Contractors
California Restaurant Association
California Retailers Association
Plumbing-Heating-Cooling Contractors Association of
Western Electrical Contractors Association
Western Growers Association
Hearing Date: June 25, 1014 AB 1723
Consultant: Deanna D. Ping Page 7
Senate Committee on Labor and Industrial Relations