BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Senator Ben Hueso, Chair
Date of Hearing: June 11, 2013 2013-2014 Regular
Session
Consultant: Gideon L. Baum Fiscal:No
Urgency: No
Bill No: AB 2074
Author: Hernandez
As Introduced/Amended: February 20, 2014
SUBJECT
Recovery of wages: liquidated damages.
KEY ISSUE
Should the Legislature provide that the statute of limitations
for liquidated damages for failure to pay the minimum wage be
the same length of time as the statute of limitations for
actions to recover the unpaid wages?
ANALYSIS
Existing law provides for a statute of limitations for the
collection of wages of three years and a statute of limitations
for the collection of penalties of one year, unless the statute
imposes a different statute of limitations. (Code of Civil
Procedure §§338 & 340)
Existing law provides specified timelines for final payment by
an employer to an employee due to discharge, quitting
employment, end of temporary employment assignment, or other
industry-specific pay timelines. (Labor Code §§ 201, 201.3,
201.5, 202, & 205.5)
Existing law requires that, if an employer willfully fails to
pay wages due to an employee who is discharge 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 for up to 30 days. Penalties for failure
to timely pay wages can be sought until the expiration of the
statute of limitations for the wages in which the penalties are
being sought. (Labor Code §203)
Existing law 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.
The current minimum wage is $9.00 per hour and will rise to
$10.00 per hour on January 1, 2016. (Labor Code §1182.12)
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.
The Labor Commissioner may require an award in the amount of the
wages owed, plus interest. Existing Civil Code sets the
interest rate at 10 percent. (Labor Code §§ 98 & 98.2 and Civil
Code § 3289)
Existing law also permits an individual to seek recovery through
a civil suit of the unpaid balance of the minimum wage,
including interest, attorney fees, and costs of the suit.
(Labor Code §1194)
Existing law also 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.
(Labor Code §1194.2 and Civil Code § 3289)
Existing law 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. (Labor
Code §1194.2)
This bill would clarify that the statute of limitations for a
suit filed to pursue liquidated damages for the failure to pay
the minimum wage will run until the expiration of the statute of
limitations for the wages in which the penalties are being
sought.
Hearing Date: June 11, 2013 AB 2074
Consultant: Gideon L. Baum Page 2
Senate Committee on Labor and Industrial Relations
COMMENTS
1. Liquidated Damages and Bain v. Tax Reducers, Inc.:
AB 2074 originates from an unusual recent court decision on
unpaid wages. In Bain v. Tax Reducers, Inc. (219 Cal.App.4th
110 (2013)), the Court of Appeals held that the plaintiff was
an employee, not an independent contractor as claimed by the
employer. Since the employer refused to pay any wages until
the matter of the employee's status as an independent
contractor was resolved by the courts, the Court of Appeals
found that the employer's non-payment of any wages violated
the minimum wage law.
However, in a surprise twist, the Court of Appeals went beyond
this simple decision. The Court of Appeals asked for briefing
on if liquidated damages for payment of wages below the
minimum wage had a statute of limitations of one year or three
years. Despite the fact that both sides were in agreement
that the statute of limitations was three years, as well as
the fact that prior case law would seem to prohibit an
alternative interpretation (see Pineda v. Bank of America, 50
Cal.4th 1389 (2010)), the Court of Appeals ruled that the
statute of limitations was in fact one year for the collection
of liquidated damages. This creates a new and nonsensical
interpretation of the law --- specifically, that the statute
of limitations for liquidated damages for paying wages late
runs for three years, while the statute of limitations for
liquidated damages for paying less than the minimum wage (or
simply not paying wages altogether) would only be one year.
AB 2074 would overturn the statute of limitations finding in
Bain v. Tax Reducers, Inc. and return the statute of
limitations for liquidated damages due to paying less than the
minimum wage to three years.
2. Proponent Arguments :
Supporters note that this bill will bring consistency between
Hearing Date: June 11, 2013 AB 2074
Consultant: Gideon L. Baum Page 3
Senate Committee on Labor and Industrial Relations
the statute of limitations for claims of liquidated damages
for minimum wage violations and claims for unpaid minimum
wages, and supporters argue that restricting the ability to
obtain liquidated damages dilutes the deterrent effect on
employers who fail to pay the minimum wage. Supporters
further argue that a liquidated damages structure that only
adds an additional liquidated damages award for one year of an
unpaid minimum wage claim sends a statement that there is no
real penalty for such worker exploitation beyond one year.
3. Double Referral to Senate Judiciary Committee :
Should AB 2074 pass this Committee, it will be referred to the
Senate Committee on Judiciary.
4. Prior Legislation :
AB 240 (Bonilla), Statutes of 2011, Chapter 272, authorizes
the Labor Commissioner to recover liquidated damages for an
employee who brings a complaint alleging payment of less than
the minimum wage.
SUPPORT
California Conference of Machinists
California Conference of the Amalgamated Transit Union
California Federation of Teachers, AFL-CIO
California Labor Federation, AFL-CIO
California Rural Legal Assistance Foundation
California School Employees Association, AFL-CIO
California State Association of Electrical Workers
California State Pipe Trades Council
California Teamsters Public Affairs Council
Engineers & Scientists, IFPTE Local 20
International Longshore and Warehouse Union, Coast Division
Professional & Technical Engineers, IFPTE Local 21
The Communications Workers of America, District 9, AFL-CIO
UNITE HERE
Utility Workers Union of America, Local 132
Western State Council of Sheet Metal Workers
Hearing Date: June 11, 2013 AB 2074
Consultant: Gideon L. Baum Page 4
Senate Committee on Labor and Industrial Relations
OPPOSITION
None on file.
Hearing Date: June 11, 2013 AB 2074
Consultant: Gideon L. Baum Page 5
Senate Committee on Labor and Industrial Relations