BILL ANALYSIS �
AB 2416
Page 1
Date of Hearing: April 23, 2014
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hern�ndez, Chair
AB 2416 (Stone) - As Amended: March 28, 2014
SUBJECT : Liens: laborers and employees.
SUMMARY : Authorizes an employee to record and enforce a wage
lien upon (1) an employer's property, and (2) the real property
at which the employee performed work, as specified.
Specifically, this bill :
1)Provides that an employee shall have a lien on all property of
the employer for the full amount of any wages and other
compensation, penalties, and interest owed to the employee,
subject to the following:
a) If the employer is a natural person, the lien shall only
apply to employer's principal place of residence only to
the extent that the employee provided labor to the benefit
of the employer's household or principal residence.
b) A lien shall not be claimed by an employee who is exempt
from specified administrative, executive, or professional
exemptions under current law.
c) The lien shall not attach if the employer has obtained a
surety bond or insurance in an amount adequate to fully
satisfy the employee's claim, as specified.
d) The lien shall not apply to work performed under a valid
collective bargaining agreement, as specified.
e) The lien action may be also be undertaken by any person
or entity to which a portion of an employee's compensation
is payable or that has standing under applicable law, or
that is authorized by the employee to act on the employee's
behalf.
f) The lien shall take precedence over all other claims,
debts, judgments, decrees, liens, encumbrances, or
mortgages originating after the date the lien is filed or
recorded, except as specified.
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g) As to the first $50,000 of the amount claimed, the lien
shall takes precedence over all other claims, debts,
judgments, decrees, liens, encumbrances, or mortgages
originating prior to the date the notice of lien is filed
or recorded, except as specified.
2)Provides that an employee shall have a lien on the real
property at which the employee performed work for the amount
of any wages and other compensation, penalties, and interest
owed to the employee under any of the following circumstances:
a) The property owner and the employee's employer are
related parties, as defined.
b) The employee was employed by a contractor or
subcontractor performing services for the property owner or
its agent, or for a related party to the property owner.
c) The employee was employed on commercial property by a
tenant or subtenant if the work was performed in an
industry "with a traditionally high risk of wage theft"
(the restaurant, garment, car wash, grocery store,
recycling and waste collection, trucking and hauling, and
warehouse industries).
d) The employee was employed to perform "property services
work" on commercial property. "Property services work" is
defined to mean work in the janitorial, security guard,
parking services, and landscaping and gardening industries.
3)Provides that a lien on the real property at which the
employee performed work shall be subject to the following:
a) If the property owner is a natural person, the lien
shall apply to the property owner's principal residence
only to the extent that the employee provided labor to the
benefit of that household or residence.
b) A lien shall not be claimed by an employee who is exempt
from specified administrative, executive, or professional
exemptions under current law.
c) The lien shall not attach if the employer or property
owner has obtained a surety bond or insurance in an amount
adequate to fully satisfy the employee's claim, as
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specified.
d) The lien shall not apply to work performed under a valid
collective bargaining agreement, as specified.
e) The lien action may be also be undertaken by any person
or entity to which a portion of an employee's compensation
is payable or that has standing under applicable law, or
that is authorized by the employee to act on the employee's
behalf
4)Requires the employee, (at least five days prior to recording
a notice of lien for an employer's property, and at least 20
days prior to recording a notice of lien for a property owner
at whose property the employee performed work), to provide the
owner of the property with a preliminary written notice of the
intent to record a lien, as specified.
5)Provides that the notice of lien shall be executed under
penalty of perjury and shall include specified information.
6)Provides that the lien shall be permanently extinguished
unless the notice of lien is served on the employer or
property owner within 180 days of the date the employee ceased
working for the employer.
7)Establishes timelines and procedures for the commencement of
civil actions to enforce the lien, as specified.
8)Provides that if an employee acted unreasonably or in bad
faith is refusing to file a release of lien, the employer or
property owner shall be entitled to recover attorney's fees
and costs, and authorizes the court to issue a fine against
the employee not to exceed $1,000.
9)Provides that if a court finds that false information was
knowingly and in bad faith included in a notice of lien with
an intent to defraud, the lien shall be extinguished and the
right to a lien forfeited, and the court may award reasonable
attorney's fees and costs to the property owner or employer.
10)Makes other related and conforming changes.
EXISTING LAW :
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1)Gives mechanics, persons furnishing materials, artisans, and
laborers of every class the right to file a lien upon the
property upon which they have bestowed labor or furnished
material for the value of such labor and material. Requires
the Legislature to provide, by law, for the speedy and
efficient enforcement of such liens. (Article XIV Section 3
of the California Constitution.)
2)Sets forth the obligations, rights, and remedies of those
involved in a construction project with regard to mechanics
liens and generally regulates the conditions under which a
mechanics lien may be enforced. (Civil Code Sec. 8400 et
seq.)
3)Recognizes prejudgment wage liens against property as a remedy
in certain industries, including agriculture (Civ. Code �
3061.5-3061.6), logging (Civ. Code � 3065), and mining (Civ.
Code � 3060).
4)Permits an employee to file a claim with the Department of
Labor Standards Enforcement for unpaid wages, compensation,
and penalties. Authorizes the State Labor Commissioner to
investigate complaints, hold hearings on a claim, and issue an
appropriate order, decision, or award, and allows either party
to appeal an order, decision, or award made by the
Commissioner to the appropriate civil court. (Labor Code
Sections 98 through 98.2.)
FISCAL EFFECT : Unknown
COMMENTS : This bill revisits an issue that was raised last
year in AB 1164 (Lowenthal) - the difficulty (or more often
inability) of workers to collect on judgments for claims for
unpaid wages. In describing the purpose of this bill, the
author states the following:
"According to a UCLA Labor Center report from 2013, only
seventeen percent of California workers who succeed in a
wage claim with the California Division of Labor Standards
Enforcement (DLSE) were able to successfully collect those
wages. It is unacceptable that eighty-three percent of
individuals who have won decisions with the DLSE do not
receive their wages.
The collection rate is so low because Labor Commissioner or
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Civil Court decisions on wage claims can sometimes take
from a year to a year and a half to conclude. This long
time period at times results in businesses closing or
filing for bankruptcy. In fact, 60 percent of DLSE
judgment's against employers are issued at a time when the
business entity is found to be "non-active." This is a
major contributing factor to the seventeen percent
collection rate.
This bill would allow an employee to place a lien on the
property of their employer, with proper notification, in
cases where the employee has determined there has been wage
theft. The ability to record this lien offers the employee
a tool for recovering lost wages. Liens have been
successful in providing mechanics and contractors with a
tool to protect themselves from wage theft, and this bill
would provide that same tool."
The Problem of "Wage Theft"
Various recent studies have highlighted concerns about alleged
widespread "theft of wages" in the United States and in
California, particularly in the underground economy. For
example, in 2009 the Ford Foundation sponsored a study that
surveyed 4,387 workers in low-wage industries in the three
largest U.S. cities - Chicago, Los Angeles and New York City.
The study revealed that 26 percent of workers in the sample were
paid less than the legally required minimum wage, 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. (Broken Laws, Unprotected Workers:
Violations of Employment and Labor Laws in America's Cities,
Center for Urban Economic Development, National Employment Law
Project, UCLA Institute for Research on Labor and Employment
(2009).)
Another study focused on a survey of 1,815 workers in Los
Angeles County. The survey found that low-wage workers in Los
Angeles regularly experience violations of basic laws that
mandate a minimum wage and overtime pay and are frequently
forced to work off the clock or during their breaks. Other
violations documented in the survey include lack of required
payroll documentation, late payments, stealing tips, and
employer retaliation. (Milkman, Gonzalez and Narro, Wage Theft
and Workplace Violation in Los Angeles: The Failure of
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Employment and Labor Law for Low-Wage Workers, UCLA Institute
for Research on Labor and Employment (2010).) The survey also
revealed that the various forms of nonpayment and underpayment
of wages take a heavy monetary toll on workers and their
families. Respondents who experienced a pay-based violation in
the previous work week lost an average of $39.81 out of average
weekly earnings of $318.00 (or 12.5 percent). Assuming a
full-year work schedule, these workers lost an average of
$2,070.00 annually out of total earnings of $16,536.00. The
survey estimated that, in a given week, 654,914 workers in Los
Angeles County suffer at least one pay-based violation.
Extrapolating from this figure, front-line workers in low-wage
industries lose more than $26.2 million per week as a result of
employment and labor law violations.
Effectiveness of Existing Methods of Recovering Unpaid Wages
Under existing law, when an employer fails to pay wages due, the
employee has the right to file a claim against his or her
employer (or former employer) with the Department of Labor
Standards Enforcement (DLSE), which is directed by the State
Labor Commissioner. The Labor Commissioner has jurisdiction
over most private sector employees, except those that are bona
fide independent contractors. In some cases, according to case
law, the Commissioner does not have jurisdiction over those
working under collective bargaining agreements. Existing law
requires an employee who feels that his or her wages have been
wrongly withheld must go through DLSE and according to
statutorily prescribed procedures. (Labor Code Section 98 et
seq.) After conducting an investigation, the Labor Commissioner
may hold an administrative conference or hearing, or both. If a
party is unhappy with the Commissioner's decision, it can appeal
to the appropriate civil court. (Labor Code Section 98.2.)
However, the author contends that even where a worker wins a
favorable decision, the process of collecting the award is often
difficult and ineffective. Irresponsible employers may have
already hidden their cash assets, declared bankruptcy, or
otherwise become judgment-proof. According to the author, state
agencies simply do not have the resources to collect wages even
where a decision has been rendered in favor of the employee.
Giving employees a "wage lien" - similar to but in many ways
broader than the customary "mechanic's lien" - would provide an
additional and arguably more effective tool for an employee to
recover unpaid wages.
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Mechanic's Lien Not Available to Most Workers
In addition to permitting claims to be filed with the DLSE and
Labor Commissioner, the California Constitution gives
"mechanics, persons furnishing materials, artisans, and laborers
of every class the right to file a lien upon the property upon
which they have bestowed labor or furnished material for the
value of such labor and material." To further this end, the
state constitution requires the Legislature to provide, by law,
for the speedy and efficient enforcement of such liens.
Accordingly, provisions of the Civil Code set forth the
obligations, rights, and remedies of those involved in a
construction project. However, the author claims that the
mechanic's lien is inadequate for most workers. For example, it
is generally only available to construction workers (and a few
others specially provided for by statute) and it only allows the
worker to place a lien on the property upon which labor was
bestowed. An employee who performed labor that did not entail
construction or making an improvement to real property - such as
service work, for example - cannot make use of a mechanic's
lien.
Liens Against Real Property at Which the Employee Performed Work
Like the prior version of this bill (AB 1164), one of the more
controversial sections of this bill is the provision that allows
an employee, in addition recording a lien against the employer's
property, to record a lien on the real property at which the
employee performed work .
Specifically, AB 1164 authorized a lien against the property
upon which the employee bestowed labor "for the benefit of the
property owner and with the owner's consent or knowledge that
such labor was being provided."
This bill takes a different approach to the issue. This bill
provides that an employee shall have a lien on the real property
at which the employee performed work under any of the following
circumstances:
The property owner and the employee's employer are
related parties, as defined.
The employee was employed by a contractor or
subcontractor performing services for the property owner or
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its agent, or for a related party to the property owner.
The employee was employed on commercial property by a
tenant or subtenant if the work was performed in an
industry "with a traditionally high risk of wage theft"
(the restaurant, garment, car wash, grocery store,
recycling and waste collection, trucking and hauling, and
warehouse industries).
The employee was employed to perform "property services
work" on commercial property. "Property services work" is
defined to mean work in the janitorial, security guard,
parking services, and landscaping and gardening industries.
Opponents raise strong objections to this particular provision
of the bill. For example, some opponents state the following:
"This directly allows an employee who performs work to file
a wage lien against a third party homeowner or commercial
property owner who had no actual control over the payment
of wages. It is patently unfair to hold an innocent third
party liable for the alleged, unproven acts of another.
Notably, the bill states that with regard to the first
category, the property owner and employee must be
"related," and for the third and fourth category, any lien
against a third party shall not apply unless the employee
is in a "high risk industry." However, who will ultimately
make the determination as to whether the employee's
employer and property owner are "related parties" as
defined? Who will determine what type of industry in which
the employee is engaged? Because the bill allows an
employee to file a lien pre-judgment, there is no impartial
tribunal to determine whether the lien has been filed in
accordance with these proposed parameters. The only person
making that determination under [this bill] is the
employee, who notably is not even required to identify in
the statement for a lien evidence that the property owner
and employer are "related," or in what type of industry
he/she is employed. Once a lien is improperly filed, the
property owner will then have to spend time and money
getting the lien removed by proving the lien should never
have been filed in the first place."
Priority and "Super-Priority" Lien Provisions
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As introduced, this bill grants a lien precedence over all other
liens, claims, or encumbrances perfected after the date that the
notice of the lien is filed or recorded, except as provided.
Moreover, at least as to the first fifty thousand dollars, the
bill provides that the wage lien would take precedence over all
other liens, claims, or encumbrances that were perfected prior
to the filing or recording of the notice of the wage lien.
However, the wage lien would not have super-priority over a tax
lien or other government lien, a purchase money mortgage, a
security interest in personal property retained by the seller of
that personal property in a sales transaction, or other liens
that arise from the performance of labor, including a mechanic's
lien.
AB 1164 from last year contained language that was similar to
these provisions. However, that language was subsequently
deleted from the bill after the bill was heard in the Assembly
Judiciary Committee.
Opponents also raise significant concerns with this provision of
the bill:
"[This bill] will also basically destroy commercial
investments or lending in California as well as personal
home loans. Specifically, [this bill] would (1) give a
wage lien priority over all other liens filed after the
wage lien, except a tax lien, purchase money mortgage,
security interest in personal property, or mechanic's
liens/labor liens; and (2) a priority for the first $50,000
of the wage lien over all other liens, filed before the
wage lien, except a tax lien, government lien, purchase
money mortgage, or mechanic's lien. This means it would
take precedence over child support liens, alimony, judgment
liens, second mortgages on real property or lines of
credit.
The direct result of such a super-priority lien for
businesses would basically be the end of commercial
investment and real estate in California. It is impossible
to imagine that a financial lender would provide a mortgage
on real property if its interest in that property could be
surpassed at any time by a wage lien, even when that
interest was asserted first. Moreover, given that [this
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bill] allows an employee to file a lien on any real
property "where the employee performed work" when the
property owner and employer are "related," this could
directly impact personal homeowners as well. The real
estate market in California is just recently showing signs
of improvement. If [this bill] were enacted, it will
basically eliminate any opportunity for further recovery,
thereby destroying jobs in California."
ARGUMENTS IN SUPPORT :
This bill is co-sponsored by the Service Employees International
Union (SEIU), which states that it is an attempt to fight the
high rate of wage theft in California by authorizing a simple
wage lien process for low-wage workers to use against employers
who rob them of their wages.
SEIU goes on to state:
"California has strong labor protections on paper, but in
reality companies can pick and choose whether they want to
follow the law or break it. As a result, billions of
dollars are stolen every year from workers' paychecks,
which hurts workers, their families, their communities, and
law-abiding businesses.
Under current law, workers can pursue a wage claim through
the Division of Labor Standards Enforcement, but even after
winning their case, they fail to recover even a single
penny of what's owed to them 83% of the time (according to
a 2013 UCLA Labor Center/National Employment Law Project
study). This is due to the fact that in 60% of the cases
where a worker succeeded in winning their claim with DLSE
the employer was listed as non-active (i.e. defunct) when
the judgment was issued.
These circumstances have created an environment that allows
Billions of dollars to be stolen every year from workers'
paychecks. A 2010 UCLA study found 30% of low-wage workers
in Los Angeles were paid less than the minimum wage in the
week before the survey. The same study showed that in Los
Angeles County, workers have more than $1 billion in wages
stolen from them every year. This is money that would
otherwise support families, our communities, and local
businesses."
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SEIU concludes that this bill creates a clear standard to
prevent unscrupulous businesses from stealing from workers.
Workers need better tools that will help them recover the wages
they are owed, and good businesses need a level playing field.
In addition, the United Food and Commercial Workers Union,
Western States Council supports this bill and states that over
the past twenty years, we have seen a growing and consistent
pattern of abuse by "unethical corrupt" businesses that take
advantage of low-wage workers in a variety of industries that
are an integral player in the "underground economy." They
argue:
"We believe that good employers should also be supportive
of this measure to finally apply 'remedies' that turn the
tide away from economically disadvantaged workers and
against 'bad players' in the marketplace.
It is imperative that we advance your bill for passage and
finally build a curtain of worker protections and
enforcement that is responsive and measurable to state
agencies and organizations who everyday grow tired and
frustrated with the status-quo of inefficient measures."
ARGUMENTS IN OPPOSITION :
Opponents, including the California Chamber of Commerce, contend
that this bill would cripple California businesses by allowing
any employee, governmental agency, or anyone "authorized by the
employee to act on the employee's behalf" to file super priority
liens on an employer's real property or any property where an
employee "performed work" for an alleged, yet unproven, wage
claim.
They continue by stating:
"Despite the undeniable complexity of wage and hour laws in
this state, [this bill] would allow any employee,
governmental agency, or anyone "authorized by the employee
to act on the employee's behalf," to file a lien against
the employer's real or personal property simply on the
basis that the employee believes he or she has a valid wage
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claim against the employer. At the time of filing the
lien, the employee would have no burden to provide any
actual evidence that the employer violated any wage and
hour law. Rather, all the employee would have to do is
simply provide: (1) a demand statement of the alleged
amount owed; (2) general statement of the work performed;
and (3) employer's name and address.
Under [this bill], this lien could be applied for single
employee wage claims that amount to several hundred dollars
in damages and/or class action and representative wage
claims that allege millions of dollars in damages.
Employees should not be allowed to interfere with an
employer's business or property, or someone else's real
property where work was performed, through filing a lien of
such significance without first proving the merit of their
allegations. To allow otherwise will basically subject
employers to constant extortion in order to avoid dealing
with a lien on their property.
[This bill] allows a lien to be filed for all unpaid wages,
"other compensation," and related penalties, not just
minimum wage violations. The scope of this is quite broad
and includes, but is not limited to, the following:
overtime pay; meal period; rest periods; vacation pay;
commission; tips; piece rate; bonuses; split shift pay;
reporting time pay; shift differential pay; on-call pay;
stand-by pay; meals and lodging credit violations; expense
reimbursements; compensation for tools, uniforms, and
equipment; and, compensation for normal wear and tear of
uniforms, tools, and equipment."
Moreover, opponents argue that this bill forces property owners
to resort to courts that are already underfunded. They argue
that if a lien is improperly filed against an employer's
property or third party's property, and the employee fails to
withdraw the lien but does not necessarily act in bad faith or
with the intent to defraud, there is no consequence. Rather,
the employer or property owner must petition the court for
removal of the lien before being able to fully utilize their
property. Opponents state that it is undisputed that the
judicial branch has suffered severe budget cuts in recent years
that has created a significant backlog of civil cases. Unless
the judicial branch receives additional funding in this year's
budget, it will have to continue to cut services and reduce
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staff. Under this bill, property owners who cannot locate the
employee who filed the lien to have it removed or where the
employee refuses to remove the lien, will have the property
essentially frozen for months, even years, until the judicial
branch can actually calendar the petition for adjudication.
PRIOR RELATED LEGISLATION :
As discussed above, this bill is similar, but not identical to,
AB 1164 (Lowenthal) from last year. In January, AB 1164 was
moved to the inactive file on the Assembly floor and was not
taken up for a vote.
This bill is also similar, but not identical to, the introduced
version of AB 2517 (Eng) from 2012. AB 2517 was subsequently
amended to provide for wage liens only in the car wash and
polishing industry. AB 2517 failed passage on the Assembly
floor.
DOUBLE REFERRAL :
This bill has been double-referred to the Assembly Judiciary
Committee, where it will be heard should it pass this Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Asian Americans Advancing Justice-Asian Law Caucus
Asian Americans Advancing Justice-Los Angeles
California Employment Lawyers Association
California Labor Federation, AFL-CIO
California Rural Legal Assistance Foundation
Centro Legal de la Raza
Chinese Progressive Association
CLEAN Carwash Campaign
Coalition for Humane Immigrant Rights Los Angeles (CHIRLA)
Community Action Board of Santa Cruz County
Consumer Attorneys of California
Employee Rights Center
Equal Rights Advocates
Filipino Advocates for Justice
Garment Workers Center
KIWA (Koreatown Immigrant Workers Alliance)
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Koreatown Immigrant Workers Alliance (CoSponsor)
Los Angeles Alliance for a New Economy
Maintenance Cooperation Trust Fund
National Day Labor Organizing Network (CoSponsor)
National Day Laborer Organizing Network
National Employment Law Project
National Employment Law Project (CoSponsor)
National Immigration Law Center
National Lawyers Guild Labor & Employment Committee
Service Employees International Union (CoSponsor)
United Food & Commercial Workers Western States Council
Wage Justice Center
Wage Justice Center (CoSponsor)
Women's Employment Rights Clinic, Golden Gate University School
of Law
Workplace Justice Initiative
Oppose Unless Amended
Prof. J. David Sackman, Esq.
Opposition
Acclamation Insurance Management Services
Air Conditioning Trade Association
Allied Managed Care
Associated Builders and Contractors - San Diego Chapter
Associated Builders and Contractors of California
Associated General Contractors
Building Owners and Managers Association of California
California Apartment Association
California Association for Health Services at Home
California Association of Winegrape Growers
California Building Industry Association
California Business Properties Association
California Business Roundtable
California Chamber of Commerce
California Chapter of American Fence Association
California Employment Law Council
California Farm Bureau Federation
California Fence Contractors' Association
California Grocers Association
California Hospital Association
California Hotel and Lodging Association
California Land Title Association
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California Landscape Contractors Association
California League of Food Processors
California Manufacturers and Technology Association
California Mortgage Bankers Association
California Newspaper Publishers Association
California Pool and Spa Association
California Professional Association of Specialty Contractors
California Restaurant Association
California Retailers Association
Civil Justice Association of California
Coalition of Small and Disabled Veterans Businesses
Construction Employers' Association
El Centro Chamber of Commerce
Flasher Barricade Association
Fullerton Chamber of Commerce
Greater Bakersfield Chamber of Commerce
Greater Riverside Chambers of Commerce
Independent Insurance Agents & Brokers of California
International Council of Shopping Centers
Marin Builders Association
NAIOP of California, the Commercial Real Estate Development
Association
National Federation of Independent Business
Orange County Business Council
Oxnard Chamber of Commerce
Palm Desert Area Chamber of Commerce
Plumbing-Heating-Cooling Contractors Association of California
Porterville Chamber of Commerce
San Jose Silicon Valley Chamber of Commerce
Santa Clara Chamber of Commerce and Convention-Visitors Bureau
Simi Valley Chamber of Commerce
Southwest California Legislative Council
Tahoe Chamber of Commerce
Visalia Chamber of Commerce
Western Electrical Contractors Association
Western Growers Association
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091