BILL ANALYSIS �
AB 2416
Page 1
Date of Hearing: May 14, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 2416 (Stone) - As Amended: May 6, 2014
Policy Committee: LaborVote:7-3
Judiciary 5-2
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill authorizes an employee to record a wage lien on an all
property of an employer, including after-acquired property, for
the full amount of any wages and other compensation, penalties,
and interest owed to the employee. Specifically, this bill:
1) Requires the lien to take precedence over all other claims,
debts, judgments, decrees, liens, encumbrances, or mortgages
originating after the date the lien is filed or recorded.
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 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 all property of the employer, and the
real property at which the employee performed work, shall be
subject to the following:
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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
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, as specified, 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; 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 and shall include specified information.
6)Establishes timelines and procedures for the commencement of
civil actions to enforce the lien, as specified.
7)Sets forth conditions under which an employer may release the
notice of lien. Requires the employer provide notice to the
employee that the lien should be released and the basis for
that belief, and request that the employee record or file a
release of the notice of lien. If the employee fails to
respond within 30 days of the date of mailing of the notice,
the employer may give notice to the Labor Commissioner that
the employee did not respond, and request that the Labor
Commissioner file or record a release of the notice of lien,
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including a copy of the notice of lien and a certification,
made under penalty that the employer followed required
procedures and that the employee did not respond.
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)Makes other related and conforming changes.
FISCAL EFFECT
1)It is difficult to predict the number of liens that could be
recorded as a result of this bill. The list of potential
penalties for which a lien could be recorded is large and
includes minimum wage violation penalties, waiting time
penalties, failure to pay penalties, unlawfully withholding of
wages penalties, itemized wage statement penalties, payroll
records penalties, and worker's compensation penalties, among
others.
The Department of Industrial Relations' Division of Labor
Standards Enforcement (DSLE) estimates ongoing special fund
costs (Labor Enforcement and Compliance Fund) of approximately
$6.1 million. The increased workload is related to:
a) Determining whether specific property on which an
employee bestowed labor implicates rights of property
owners, other than employers, who would have to be an
additional party in an administrative proceeding involving
the Labor Commissioner.
b) Additional prehearing investigation of wage claims to
confirm the appropriateness of a lien's contents, including
whether an employee claimant is likely not eligible to
obtain a lien for being exempt from the protections of
Industrial Welfare Commission wage orders, and performing
actions necessary to record the lien with either the
recorder's office or the Secretary of State.
c) Performing additional administrative functions,
including preparing the lien form, providing notices to
parties, and service of documents.
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Cost estimates include recent amendments to the bill that make
the Labor Commissioner responsible for removing a lien at the
request of the employer. The Labor Commissioner believes
there will be a need to investigate and /or remove the lien in
the majority of all wage claims.
DIR also may incur one-time costs should rulemaking or
regulations be required to implement the bill's provisions.
2)The Secretary of State (SOS) will incur costs, likely in the
range of $100,000 to $110,000, to the extent wage liens are
treated the same as mechanics liens. If the SOS is able to
treat wage liens the same as a mechanics lien, they would not
need to reprogram computer systems. The filings would be
handled through an existing filing form with additional wage
lien information included as an addendum. By treating wage
liens as mechanics liens for filing purposes, the SOS
attributes costs webpage creation, system application, forms,
procedure, and regulation changes. The SOS expresses concerns,
however, with the implementation date of January 1, 2015 and
believes a later effective date would ensure the SOS would be
ready to accept wage lien filings.
3)Unknown, potentially significant court costs associated with
additional proceedings regarding wage claims.
COMMENTS
1)Purpose . This bill revisits an issue raised in January of this
year in AB 1164 (Lowenthal) - the problem of workers
collecting on judgments for claims for unpaid wages. (AB 1164,
after extensive amendments in this committee, was not taken up
on the Assembly Floor.) Under current law, workers can pursue
a wage claim through the Division of Labor Standards
Enforcement (DLSE). The collection rate is low, however,
because decisions on wage claims can sometimes take from a
year to a year and a half to conclude. This long time period
can result in businesses closing or filing for bankruptcy.
Supporters of the bill, including Service Employees
International Union (SEIU), contend a wage lien process is
needed for low-wage workers to use against employers who owe
wages.
Similar to AB 1164, this bill also allows an employee to
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record a lien on the real property at which the employee
performed work, though with a slightly different approach. 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 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
its agent, or for a related party to the property owner.
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.
This bill also provides that liens established pursuant to
this bill take priority over all other liens, claims, or
encumbrances perfected after the date that the notice of the
lien is filed or recorded, except 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 contained similar language, however, that
language was subsequently deleted from the bill.
Finally, this bill sets forth a process for the employer to
release the lien through the Labor Commissioner. This process
was not in AB 1164.
1)Mechanic's Lien . This bill provides employees with a wage
lien option similar to, but much broader than, the current
mechanic's lien. 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." The state
constitution further requires the Legislature to provide, by
law, for the speedy and efficient enforcement of such liens.
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The Civil Code sets forth the obligations, rights, and
remedies of those involved in a construction project. This
lien is generally only available to construction workers (and
a few others specially provided for by statute) and 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.
2)Opposition . A large coalition of business-related interests,
including the California Chamber of Commerce, the California
Building Industry Association, the Associated General
Contractors, and the California Retailers Association oppose
this bill over concerns that any employee, governmental
agency, or anyone "authorized by the employee to act on the
employee's behalf," could record a lien against the
employer's real or personal property on the basis that the
employee believes he or she has a valid wage claim against the
employer. The opposition contends employees should not be
allowed to interfere with an employer's business or property
by filing liens of such potential significance without having
to first prove the merit of their allegations, and that such
authorization will subject employers to constant extortion in
order to avoid a lien on their property. Moreover, opponents
are also concerned about provisions allowing a lien on
property other than employer's property, thus potentially
placing a burden on a third party having no knowledge or
control over the alleged violation.
Analysis Prepared by : Misty Feusahrens / APPR. / (916)
319-2081