BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
AB 2416 (Stone)
As Amended May 23, 2014
Hearing Date: June 24, 2014
Fiscal: Yes
Urgency: No
TMW
SUBJECT
Liens: Laborers and Employees
DESCRIPTION
This bill would enact the California Wage Theft Recovery Act and
authorize an employee to have a lien on all property of the
employer in California for the full amount of any wages and
other compensation, penalties, and interest owed to the
employee.
This bill would provide for notice of the lien to employers,
extinguishment, and bonding to satisfy the amount of the lien.
In order to enforce the lien, this bill would require the
employee to demonstrate in a civil action that he or she is owed
wages or other compensation and any related penalties and
interest and that the property is subject to a lien. This bill
would also authorize the court to award to the prevailing
plaintiff court costs and reasonable attorney's fees.
BACKGROUND
Wage theft is a term used to describe labor law violations such
as not paying an employee minimum wages or overtime, not paying
for off-the-clock work, tip stealing, and not paying final
wages. As the author of this bill reports, wage theft is on the
rise and California workers are not being paid money earned.
Several high profile wage theft cases have been reported in
recent years. In February 2009, the Los Angeles City Attorney
filed criminal charges against two car wash owners for failing
to pay 250 workers the minimum wage and for denying them legally
(more)
AB 2416 (Stone)
Page 2 of ?
required meal and rest breaks. The filing alleged that, in
violation of minimum wage laws, workers were paid a flat rate of
$35.00 to $40.00 a day for shifts of more than eight hours, that
their lunch breaks were as little as fifteen minutes a day, they
received no pay for overtime work, and no medical care was
provided for lacerations and acid burns caused by the machinery
and chemicals they used on the job. The owners were charged
with failing to pay a total of $450,000 in back wages over five
years. (Cathcart, Carwashes Accused of Labor Violations (Feb.
11, 2009) New York Times
[as of
June 11, 2014].)
A similar lawsuit against a builder employing residential
construction workers in California, Nevada, and Arizona alleged
that the company failed to pay employees for hours they worked,
did not pay legally required overtime or provide breaks, and
kept workers off the clock while they traveled between job sites
and awaited materials. The suit was settled in October 2009,
providing over $242,000 in unpaid wages to 85 workers.
(McDonnell, Builder to Settle with 85 Workers in Overtime Case
(Oct. 13, 2009) Los Angeles Times
[as of June 11, 2014].)
The problem is not limited to small businesses like car washes
or garment subcontractors. In 2008, Wal-Mart announced a
settlement of sixty-three cases in forty-two states, which
involved charges that the company had forced employees to work
off the clock without pay after their official shifts ended. The
settlement totaled $352 million in unpaid wages and involved
hundreds of thousands of current and former Wal-Mart hourly
employees across the country. In California, a jury ordered
Wal-Mart to pay $172 million for making employees miss meal
breaks. (Associated Press, Wal-Mart Settles Workers' Suit for
$54.25M (Dec. 9, 2008) CBS News [as
of June 11, 2014].)
A recent University of California Los Angeles (UCLA) study found
that an estimated 654,914 workers in L.A. County suffer at least
one pay-based violation every week. Front-line workers in
low-wage industries lose more than $26.2 million per week as a
result of employment and labor law violations. The study noted
the societal ills of wage theft in that "[w]age theft not only
depresses the already meager earnings of low-wage workers, it
AB 2416 (Stone)
Page 3 of ?
also adversely impacts their communities and the local economies
of which they are a part. Low-income families spend the bulk of
their earnings on basic necessities like food, clothing, and
housing. Their expenditures circulate through local economies,
supporting businesses and jobs. Wage theft robs local
communities of this spending and ultimately limits economic
growth." (Milkman, Gonz�lez, Narro, Wage Theft and Workplace
Violations in Los Angeles, The Failure of Employment and Labor
Law for Low-Wage Workers (2010) Institute for Research on Labor
and Employment, University of California, Los Angeles, p. 58.)
Further, only 17 percent of California workers who succeed in a
wage claim filed with the California Division of Labor Standards
Enforcement were able to recover any payment, leaving 83 percent
of wage claimants unpaid. (National Employment Law Project and
UCLA Labor Center, Hollow Victories, the Crisis in Collecting
Unpaid Wages for California's Workers (June 27, 2013)
[as of
June 11, 2014] p. 2.)
This bill seeks to strengthen labor laws by providing wage
claimants a lien on all property of the employer pending the
outcome in a civil action. This bill is substantially similar
to AB 1164 (Lowenthal, 2013), which died on the Assembly Floor
inactive file.
If this bill is approved by this Committee, it will be referred
to the Senate Committee on Labor and Industrial Relations.
CHANGES TO EXISTING LAW
Existing law provides 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.
Existing law also requires the Legislature to provide, by law,
for the speedy and efficient enforcement of such liens. (Cal.
Const., art. XIV, Sec. 3.)
Existing law provides for mechanics liens relating to services
and supplies provided on a work of improvement, and generally
regulates the conditions under which a mechanics lien may be
enforced. (Civ. Code Sec. 8400 et seq.)
Existing law recognizes prejudgment wage liens against property
as a remedy in certain industries, including mining (Civ. Code
Sec. 3060), agriculture (Civ. Code Secs. 3061.5-3061.6), and
AB 2416 (Stone)
Page 4 of ?
logging (Civ. Code Sec. 3065).
Existing law requires the Labor Commissioner and his or her
deputies and representatives authorized by him or her in
writing, upon the filing of a claim therefor by an employee, or
an employee representative authorized in writing by an employee,
with the Labor Commissioner, to take assignments of, among other
things, wage claims and incidental expense accounts and advances
and mechanics and other liens of employees. (Lab. Code Sec.
96.)
Existing law authorizes the Labor Commissioner, after
investigation and upon determination that wages or monetary
benefits are due and unpaid to any worker in the State of
California, to collect such wages or benefits on behalf of the
worker without assignment of such wages or benefits to the
Commissioner. (Lab. Code Sec. 96.7.)
Existing law authorizes the Labor Commissioner to investigate
employee complaints and provide for a hearing in any action to
recover wages, penalties, and other demands for compensation,
including liquidated damages if the complaint alleges payment of
a wage less than the minimum wage fixed by an order of the
Industrial Welfare Commission or by statute, properly before the
division or the Labor Commissioner, including orders of the
Industrial Welfare Commission, and is required to determine all
matters arising under his or her jurisdiction. (Lab. Code Sec.
98.)
Existing law authorizes the Division of Labor Standards
Enforcement to file preferred claims, mechanics' liens, and
other liens of employees in the name of the Labor Commissioner,
his deputy or representative or in the names of the employees,
whenever the facts have been investigated and found to support
the claims. Existing law requires a statement that such facts
have been found shall be alleged in the preferred claim or lien
if it is filed in the name of the Labor Commissioner, his or her
deputy or representative. (Lab. Code Sec. 99.)
This bill would establish the California Wage Theft Prevention
Act, which would authorize an employee to have a lien on all
property of the employer in California, including after-acquired
property, for the full amount of any wages and other
compensation, penalties, and interest owed to the employee.
AB 2416 (Stone)
Page 5 of ?
This bill would provide that if the employer is a natural
person, a lien would apply to the employer's principal residence
only to the extent that the employee provided labor to the
benefit of the employer's household or principal residence.
This bill would provide that the amount of the lien would
include unpaid wages and other compensation required by
California law, penalties available under the Labor Code,
interest at the same rate as for prejudgment interest in this
state, and the costs of filing and service of the lien. This
bill would specify that the amount of compensation that may be
claimed as lien includes all wages agreed to be paid to the
employee, but no less than the amount required by law, including
direct wages and compensation required to be paid to other
persons or entities, that would qualify as "employer payments,"
as defined.
This bill would limit an employee's lien upon personal property
to property subject to a security interest under the Commercial
Code pursuant to the filing of a financing statement with the
Secretary of State.
This bill would provide that any act authorized or required
under this bill with regard to an employee may also be
undertaken by any person or entity, including any governmental
agency, to which a portion of an employer's compensation is
payable or that has standing under applicable law to maintain a
direct legal action on behalf of the employee to collect any
portion of compensation owed to the employee, or that is
authorized by the employee to act on the employee's behalf.
This bill would prohibit a lien from being claimed by an
employee who is exempt from the protections of Industrial
Welfare Commission wage orders under the administrative,
executive, or professional exemptions, and, in any action
involving such a lien, the employer would be required to plead
and prove exempt status as an affirmative defense.
This bill would provide that a lien pursuant to this bill is in
addition to any other lien rights held by the employee and shall
not be construed to limit these rights.
This bill would prohibit a lien from attaching if the employer
has obtained a surety bond or insurance that provides for
payment of the wages and other compensation, penalties, and
interest, claimed by the employee and is in an amount that is
AB 2416 (Stone)
Page 6 of ?
adequate to fully satisfy the employee's claim. If the surety
bond or insurance contract is inadequate to cover the entire
amount of the employee's claim, this bill would require the lien
to be limited to the amount of the claim that exceeds the bond
or insurance coverage. Within 30 days of being provided with
proof of a valid surety bond or insurance contract that applies
to the claim, the employee would be required to file a release
of any lien recorded or a notice reducing the lien to the amount
that exceeds the bond or insurance coverage.
This bill would prohibit the lien from attaching for labor
performed under a valid collective bargaining agreement if the
agreement expressly provides for a regular hourly pay of not
less than 30 percent more than the state minimum wage rate,
addresses the issue of security for the payment of wages, and
expressly waives requirements of this chapter in clear and
unambiguous terms. If part of the labor was performed under a
collective bargaining agreement as so described, this bill would
limit that lien to the amount of the claim based on labor that
was not performed under the agreement. Within 30 days of being
provided with proof of such a collective bargaining agreement,
the employee would be required to file a release of any lien
recorded or a notice reducing the lien to the amount permitted
by this bill.
This bill would provide that if an employee, after receiving
proper notice under this bill, acts unreasonably and in bad
faith in recording or filing a notice of lien or in refusing to
file a release or reduction of the lien, the employer would be
entitled to recover attorney's fees and costs in an action to
remove or reduce the lien, and the court in its discretion would
be authorized to issue a fine, not to exceed $1,000.
This bill would require the employee, at least five days prior
to recording a notice of lien with a county recorder or filing a
notice of lien with the Secretary of State, to provide the owner
or reputed owner of the property against which the lien is to be
recorded preliminary written notice of the intent to record a
notice of lien.
This bill would require that notice to include specified
information to the extent known to the person giving the notice,
proscribe an informational statement for the employer, and also
provide that the notice would not be invalid by reason of any
variance from these requirements if the notice is sufficient to
substantially inform the person given notice of the information
AB 2416 (Stone)
Page 7 of ?
required by this section and other information required in the
notice.
This bill would require that notice to be made as specified and
would be deemed to have been given three business days after
mailing of the notice.
This bill would provide that the lien would be permanently
extinguished unless a notice of lien is recorded or filed, and
served upon the employer, within 180 days of the date that the
employee ceased working for the employer. That lien would also
be permanently extinguished as to property that is transferred
or sold by the employer, unless a notice of lien was recorded or
filed before the transfer or sale, as specified.
This bill would require the employee to commence an action to
enforce the lien and prove the amount owed within 90 days of the
date of filing or recording of the notice of lien. If the
employee does not commence an action to enforce the lien within
that time, the lien would be permanently extinguished and
unenforceable, unless the employee and the owner of the property
subject to the lien agree to extend the time for enforcing the
lien in writing and record or file notice of the fact and terms
of the extension prior to the expiration of the time for
commencing an action to enforce the lien. If the employee does
not commence an action to enforce the lien within the extended
time period, the lien would be permanently extinguished and
unenforceable.
This bill would require the employee, if the lien has been
extinguished, upon demand and 15 days' notice by the employer or
any affected party, to record or file a release of the lien. If
an employee fails to file a release of the lien after proper
notice has been mailed to the employee's address as indicated on
the notice of the lien, the employer or affected party would be
authorized to petition the court for an order releasing the
lien. If the employee acted unreasonably and in bad faith in
refusing to file a release of lien, the employer or affected
party would be entitled to recover its attorney's fees and costs
incurred in the action, and the court in its discretion would be
authorized to also issue a fine not to exceed $1,000.
This bill would require the employee to record a notice of lien
on real property with the county recorder in the county where
the real property is located.
AB 2416 (Stone)
Page 8 of ?
This bill would provide that the lien attaches to all real
property owned by the employer at the time of the filing of the
notice of lien, or that is subsequently acquired by the
employer, that is located in any county in which the notice of
lien is recorded, regardless of whether the property is
identified in the notice of lien.
This bill would require the employee to file a notice of lien on
personal property with the Secretary of State in the manner,
form, and place of filing as specified. A notice of lien would
be required to be placed in the same file as financing
statements, as specified.
This bill would provide that the lien attaches to all personal
property that is owned by the employer at the time of the filing
of the notice of lien, or that is subsequently acquired by the
employer, that can be made subject to a security interest under
the Commercial Code.
This bill would require a notice of lien for real or personal
property to be executed under penalty of perjury and include the
following information:
a statement of the employee's demand for payment of the wages
and other compensation, penalties, and interest, the amount
owed to the employee, and if the amount is estimated, an
explanation for the basis of the estimate;
a general statement of the kind of work furnished by the
employee and the dates of employment;
the name of the person by whom the employee was employed; and
the employee's mailing address.
This bill would require the employee to serve the notice of lien
on the employer, by certified mail with return receipt
requested, evidenced by a certificate of mailing, postage
prepaid, addressed to the employer at the employer's residence
or place of business.
This bill would require the employee, in order to enforce a lien
under this bill, to demonstrate in a civil action, or in a Labor
Commissioner proceeding, as specified, that he or she is owed
wages or other compensation and any related penalties and
interest, or the employer's liability shall be established
pursuant to a citation issued, as specified, and the process for
contesting such a citation.
This bill would provide that if the employee chooses to pursue
AB 2416 (Stone)
Page 9 of ?
the wage claim in an administrative proceeding before the Labor
Commissioner, the Labor Commissioner may establish the amount of
lien if a lien has been recorded. If no lien has been recorded
at the time the administrative claim is filed, the Labor
Commissioner would be authorized to provide the notice and
record the lien on behalf of the employee.
This bill would provide that if the Labor Commissioner issues a
citation, as specified, for the failure to pay wages to an
employee, the Labor Commissioner may provide preliminary notice
and record a lien on behalf of the employee.
This bill would provide that if a notice of lien is recorded or
filed and an action to recover unpaid wages has been filed by
the employee, that action would also be deemed an action to
enforce the lien and foreclose upon any property subject to the
recorded lien. In the judgment resulting from an action, the
court would be authorized to order the sale at a sheriff's
auction or the transfer to the plaintiff of title or possession
of any property subject to the lien. Whether or not the court
makes an order as part of the judgment, any property subject to
the lien could be foreclosed upon at any point after a judgment
for unpaid wages is issued.
This bill would authorize the employee to be awarded court costs
and reasonable attorney's fees for filing a successful action to
enforce the lien.
This bill would require a lien on real or personal property to
be extinguished if judgment is entered against the employee in
the action to enforce the lien or if the case is dismissed with
prejudice and require the judgment to include the date the
notice of lien was recorded and, to the extent applicable, the
county in which it was recorded, the book and page or series
number of the place in the legal records in which the lien was
recorded, and a legal description of the property to which the
lien attaches.
This bill would authorize an appeal of the judgment by filing a
notice of appeal on or before 60 days after the entry of
judgment. If an appeal is filed, the lien would continue in
force until all issues on the appeal have been decided. If the
period for appeal runs without an appeal having been filed, or
if the appeal fails, the judgment entered would be equivalent to
cancellation of the lien and its removal from the record, and
the judgment would be a recordable instrument.
AB 2416 (Stone)
Page 10 of ?
This bill would release the property described in the judgment
from claim of lien upon recordation of a certified copy of the
judgment. Alternatively, if the lien is extinguished, upon
demand and 15 days' notice by the property owner, the employee
would be required to file a release of the lien. If an employee
refuses to file a release of the lien after proper notice, an
employer or property owner would be authorized to petition the
court for an order to file a release of the lien. If the
employee acted unreasonably and in bad faith in refusing to file
a release of the lien, the employer or property owner would be
entitled to attorney's fees and costs incurred in the action,
and the court in its discretion would be authorized to also
issue a fine not to exceed $1,000.
This bill would authorize any number of claims to enforce
employee liens against the same employer to be joined in a
single proceeding, but the court would be authorized to order
separate trials or hearings.
This bill would require the court, if the proceeds of the sale
of the property subject to a lien are insufficient to pay all
the claimants, whether or not claims have been joined together,
to order the claimants to be paid in proportion to the amount
due each claimant.
This bill would provide that if a court finds that false
information was knowingly and in bad faith included in a notice
of lien by an employee with an intent to defraud, the lien would
be extinguished, the right to a lien would be forfeited, and the
court would be authorized to award reasonable attorney's fees
and court costs to the property owner or employer for action
taken to defeat the lien claim.
This bill would authorize an employer to release the notice of
lien if the employer contends any of the following:
that a notice of lien is not effective;
that the lien has been extinguished because required
circumstances, as specified, are not present;
all wages due the employee have been paid;
the employer has obtained a surety bond;
the lien is for labor performed under a valid collective
bargaining agreement, as specified;
the employee has failed to provide the required notice;
the employee or Labor Commissioner has failed to commence an
action to enforce the lien within the specified time; or
AB 2416 (Stone)
Page 11 of ?
the action has been resolved against the employee.
This bill would proscribe the following procedure to release the
notice of lien:
the employer would be required to provide notice to the
employee that the employer believes 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; that
notice would be required to be made by certified mail with
return receipt requested, evidenced by a certificate of
mailing, postage prepaid, addressed to the employee at the
employee's residence or place of business;
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; the notice to the Labor Commissioner
would be required to include a copy of the notice of lien and
a certification, made under penalty of perjury, that the
employer followed the required procedures and that the
employee did not respond; and
upon receiving the employer's request, the Labor Commissioner
would be required to notify the employee that unless the
employee serves an objection on the Labor Commissioner within
30 days, the Labor Commissioner would release the notice of
lien; the Labor Commissioner's notice would be required to be
made by certified mail with return receipt requested,
evidenced by a certificate of mailing, postage prepaid,
addressed to the employee at the employee's residence or place
of business; if the employee does not serve a timely
objection, the Labor Commissioner would be required to record
or file a release of the notice of lien.
This bill would authorize an employee to 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 for performing work at that property, under any
of the following circumstances:
the property owner and the employee's employer are related
parties; if the property owner is a natural person, this lien
would 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;
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, or for the related
AB 2416 (Stone)
Page 12 of ?
party's agent, regardless of whether a written contract
exists; this provision would not apply if the services were
provided to a household or residence; or
the employee was employed to perform property services work on
commercial property by the property owner's lawful tenant or
subtenant or by the tenant's or subtenant's agent, or by a
contractor or subcontractor in the execution of a contract
awarded by the tenant or subtenant or by the tenant's or
subtenant's agent, regardless of whether a written contract
exists. This bill would define "property services work" to
mean work in the janitorial, security guard, parking services,
and landscaping and gardening industries; and this provision
would not apply if the commercial property was leased by the
property owner pursuant to a lease entered into prior to
January 1, 2015, unless the lease is modified or extended
after that date.
This bill would define "related parties" to mean a party owns or
controls, or is owned or controlled, or is under common
ownership or control, with the other party; "ownership" would
mean 50 percent or greater ownership and "control" would mean
the right granted by law to exercise decision power over
administration, finances, and operations.
This bill would include in the amount of the lien unpaid wages
and other compensation required by California law, penalties
available under the Labor Code, interest at the same rate as for
prejudgment interest in this state, and the costs of filing and
service of the lien, and the amount of compensation that may be
claimed as a lien would include all wages agreed to be paid to
the employee, but no less than the amount required by law,
including direct wages and compensation required to be paid to
other persons or entities, that would qualify as "employer
payments," as defined.
This bill would not apply to the extent that the employee would
be entitled to a mechanic's lien on the same property.
This bill would require the employee, at least 20 days prior to
recording a notice of lien with a county recorder, as specified,
to provide the owner or reputed owner of the property against
which the lien is to be recorded preliminary written notice of
the intent to record a notice of lien; and that notice would be
required to include information, as specified, the name and
address of any entity with which the employee's employer has
contracted to provide the labor for which the employee seeks
past due wages or other compensation, to the extent known by the
AB 2416 (Stone)
Page 13 of ?
person giving notice, and a statement, as specified, to the
property owner. However, that notice would not be invalid by
reason of any variance from these requirements if the notice is
sufficient to substantially inform the person given notice of
the information required in the notice.
This bill would require an employer, contractor, subcontractor,
tenant, or subtenant to make available to any person seeking to
give preliminary notice the name and address of the property
owner, and service of the required notice, given by the required
means, would be deemed to have been given three business days
after mailing of the notice.
This bill would require the employee to serve the notice of lien
on the employer and the property owner or reputed owner, by
certified mail with return receipt requested, evidenced by a
certificate of mailing, postage prepaid, addressed to the
employer at the employer's residence or place of business, to
the address of the property subject to the lien, and to the
residence or place of business of the property owner or reputed
owner.
This bill would provide that the lien attaches only to real
property owned by the property owner at the time of the
recording of the notice of lien and attaches only to the
property that is specifically identified in the notice of lien.
This bill would authorize the owner, if the judgment in an
action is against the property of a property owner who is not
the employer, to deduct the amount of the judgment and costs
from any amount owed to the employer, and, if the amount of the
judgment and costs exceed the amount owed to the employer, the
owner would be authorized to recover from the owner, or the
sureties on a bond given by the employer, if any, the remaining
amount of the judgment and costs.
COMMENT
1. Stated need for the bill
The author writes:
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
AB 2416 (Stone)
Page 14 of ?
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
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.
2. Providing wage liens to secure a potential judgment in favor
of employees
This bill would establish the California Wage Theft Prevention
Act, which would authorize an employee claiming unpaid wages to
have a lien on an employer's real or personal property.
Existing law authorizes various liens to be placed on a
defendant's property pending the outcome of a civil action.
(Civ. Code Secs. 3060, 3061.5-3061.6, 3065, 8400 et seq.)
However, existing labor laws only authorize the DLSE to file a
wage lien after a decision has been rendered substantiating the
wage claim. (Lab. Code Sec. 99.)
According to a recent study based on a comprehensive review of
records released by the DLSE, "[n]on-payment or underpayment of
wages . . . remains rampant nationwide. As a landmark survey of
low-wage workers found in 2008, 26 percent of low-wage workers
were paid less than the minimum wage in the prior week; 76
percent of those who worked more than 40 hours were not paid the
legally required overtime rate. . . . The inability of workers
and state authorities to enforce judgments and collect payment
from unscrupulous employers has widespread effects." (National
Employment Law Project and UCLA Labor Center, Hollow Victories:
The Crisis in Collecting Unpaid Wages for California's Workers
AB 2416 (Stone)
Page 15 of ?
(June 27, 2013) [as of June 11, 2014] p. 2.) This study
recommended strengthening California's wage lien provisions,
noting that "California already allows workers to file a
post-judgment lien on employer property. However, for many
workers, this is too late. A temporary pre-judgment hold would
discourage unscrupulous employers from selling, hiding, or
disposing of property while a court evaluates the wage claim or
releases the lien. An employer's business could continue to
operate while the validity of the lien is decided." (Id. at p.
19.) The study also notes that "[m]any states have wage lien
laws in some form, providing good experience and success with
this mechanism, including Georgia, Idaho, Maryland, New
Hampshire, Texas, and Wisconsin . . . where pre-judgment wage
liens are available to workers [and] 80 percent of workers are
able to recover at least some of their wages." (Id.)
Service Employees International Union California (SEIU),
sponsor, argues that "[u]nder 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. . . . 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 worker's
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."
The California Employment Lawyers Association, in support,
asserts that "AB 2416 would help combat the high rate of wage
theft in California by creating a simple lien process for
carwash workers to use against employers who rob them of their
wages. It also helps day laborers take advantage of a
longstanding tool, the mechanics' lien, by extending their
filing deadline, providing attorney's fees and costs when they
prove their claims. . . . The wage lien is a proven, simple
legal tool that costs the state nothing. It creates no new
bureaucracies and no new agencies with complicated enforcement
procedures. Instead, workers simply file with the County
Recorder or Secretary of State and pay a $10 to $30 filing fee.
AB 2416 (Stone)
Page 16 of ?
. . . Wage liens are not a new concept. Construction and
agricultural workers have had similar liens for years. In fact,
wage liens appeared in the first California Constitution - and
were invented by Thomas Jefferson! There is no more American,
Californian, or just concept than paying workers their wages."
To address the inability of wage claimants to collect on
judgments and deter employers from withholding money earned by
their employees, this bill would authorize a pre-judgment wage
lien to be placed on an employer's real or personal property
pending the outcome of the action. Notably, this bill would
provide an employer the option of obtaining a surety bond or
insurance that provides for payment of the wages and other
compensation, penalties, and interest, claimed by the employee.
However, this bill would authorize an employee to place a
pre-judgment lien on an employer's residence, even though
existing law provides limitations on post-judgment lien
enforcement on a person's homestead. (Code Civ. Proc. Secs.
704.730, 704.950.) Further, although a mechanics lien may
attach to the real property that was the work of improvement on
which the claimant provided services, this bill does not contain
the same nexus between the claimant and the property. To
address this issue, the author offers to amend this bill to
strike the residential lien provisions. (See Comment 5.)
Additionally, concern was raised about the lack of specificity
of the particular real property on which the wage lien would
attach. Proponents note that this bill is modeled after the
provisions of mechanics liens, which require the claimant to
provide a description of the site sufficient for identification
in the notice of mechanics lien. (Civ. Code Sec. 8416(a)(5).)
On the other hand, this bill would not require the employee to
state the address or site of the employer's property in the
notice of lien recorded with the county recorder. Proponents
assert that a post-judgment lien (currently available to wage
claimants) does not require a description of the site; instead,
the judgment lien on real property attaches to all interests in
real property in the county where the lien is created. (See
Code Civ. Proc. Sec. 697.340.) While failing to specifically
identify the real property on which a pre-judgment lien would
attach raises questions about whether it would be found in a
title search, proponents of this bill argue that enumerating
addresses in filing a real property lien will force wage
claimants to hire attorneys to do a property search for all of
the employer's real property. Further, proponents assert that
AB 2416 (Stone)
Page 17 of ?
this will increase the cost of filing a lien for workers and,
correspondingly, reduce access.
3. Enforcement provisions
This bill would require an employee to follow multiple
procedures in order to enforce a lien on the employer's real or
personal property. The employee would have to provide a
preliminary written notice to the owner of the property, if
different from the employer, a preliminary written notice to the
employer, record the notice of lien with the county recorder if
the lien is on real property or the Secretary of State if the
lien is on personal property. The employee would also have to
establish in a civil action that he or she is owed wages or
other compensation.
This bill also provides procedural safeguards from liens by
providing multiple arguments an employer may assert to release
the notice of lien, including that all wages due the employee
have been paid, the action has been resolved against the
employee, the employee failed to provide proper notice of the
lien; or that the employee failed to enforce the lien within the
specified time. This bill establishes deadlines for the
employee to file an action to substantiate the wage lien, and
provides remedies for the employer if the employee acts
unreasonably and in bad faith in refusing to file a release of
the lien.
The California Labor Federation, AFL-CIO, in support, asserts
that this bill "will ensure that where an employer disappears,
files for bankruptcy, shirks responsibility, closes its door and
reopens under a different business name, or engages in any other
shady and unscrupulous practice, at the end of the day, the
worker is paid for his or her labor." The California Labor
Federation also notes that this bill was amended "to ensure that
employers will get pre-notice before a lien is recorded. This
strikes the right balance between protecting the employer's due
process rights and protecting low-wage workers from wage theft."
Staff notes that this bill would not require the employee to
first seek judicial review of the validity of the employee's
wage claim prior to recording a wage lien. Notably, mechanics
liens also do not require court approval prior to recording a
lien on the property. Rather, the claimant recording a
mechanics lien must provide a statement of the claimant's demand
after deducting all just credits and offsets. (Civ. Code Sec.
AB 2416 (Stone)
Page 18 of ?
8416(a)(1).) Similarly, this bill would require the employee to
provide a statement of the employee's demand for payment of the
wages and other compensation, penalties, and interest, the
amount owed to the employee, and if the amount is estimated, an
explanation for the basis of the estimate. However, because a
civil action on the wage claim could take years to resolve, the
author may wish to explore whether initial judicial review of
the employee's request to lien on the employer's property may be
appropriate, so that only wage claims with a reasonable
likelihood of success would merit authorization for the employee
to record a wage lien. As noted in the 2013 study above, other
states have enacted wage lien laws. In Maryland, the employee
is required to obtain from the court an order to establish a
lien for unpaid wages that provides the employer the ability to
dispute the lien in court prior to lien recordation. (See Md.
Lab. and Empl. Code Ann. Sec. 3-1101 et seq.)
4. Oppositions' concerns
A coalition of business and employers groups, in opposition,
assert 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
record liens on an employer's real property or any property
where an employee 'performed work' for an alleged, yet unproven,
wage claim. This bill would also severely disrupt commercial
and personal real estate markets in this state." Additionally,
the coalition argues that the bill is not just limited to
minimum wage claims, but could include a broad spectrum of labor
claims, including claims for meal and rest periods, vacation
pay, expense reimbursements, compensation for tools, uniforms,
and equipment, all of which could include an assortment of
potential penalties that could be included in the wage lien.
Further, the coalition asserts that "the type and number of
different liens that may be filed and recorded under AB 2416 are
overwhelming, not just to businesses, but also to homeowners,
the Secretary of State, and county recorder's offices." The
coalition takes issue with the ability of an employee to file a
wage lien against a third-party homeowner or commercial property
owner who had no actual control over the payment of wages for
work performed at the owner's property. The coalition argues
that the bill will interfere with commercial investments or
lending in California because lenders will be reluctant or
unable to provide loans to borrowers if there are unproven wage
liens attached to the property. The coalition believes that the
180-day lien recordation requirement in this bill is meaningless
AB 2416 (Stone)
Page 19 of ?
and is based upon the employee's last day of work, which a
third-party property would not know. Further, the coalition
notes that there is no limit on the number of liens an employee
could record against the property owner, the bill forces
property owners into courts that are already severely
underfunded, and the Labor Commissioner removal process in this
bill is ineffective. The coalition believes there are already
sufficient protections in place for the failure to pay wages.
In response to the coalition's concerns, proponents of this bill
argue that liens are a successful way for mechanics and
contractors to protect themselves from wage theft, and this bill
would provide the same protection.
5. Author's amendments
In order to avoid confusion of this bill with AB 469 (Swanson,
Ch. 655, Stats. 2011), which enacted the Wage Theft Prevention
Act of 2011, the author offers the following amendments to be
taken, due to timing constraints, in the Senate Committee on
Labor and Industrial Relations to change the title of the act
enacted by this bill to be the "California Wage Theft Recovery
Act." Additionally, to address the homestead exemption issue
(see Comment 2), the author offers the following amendment to
remove residential lien authorization from this bill.
Author's amendments :
1. On page 2, in line 2, strike and replace "Prevention"
with "Recovery"
2. On page 2, strike lines 13 through 15 and replace with
"shall not apply to the employer's principal residence"
3. On page 11, strike lines 3 through 5 and replace with
"not apply to the property owner's principal residence"
Support : Asian Americans Advancing Justice-Asian Law Caucus;
Asian Americans Advancing Justice-Los Angeles; California
Employment Lawyers Association; California Labor Federation,
AFL-CIO; California Professional Firefighters; California School
Employees Association; AFL-CIO; Centro Legal de la Raza; Chinese
Progressive Association; CLEAN Carwash Campaign; Coalition for
Humane Immigrant Rights of Los Angeles; Community Action Board
of Santa Cruz County; Consumer Attorneys of California; Employee
Rights Center; Equal Rights Advocates; Filipino Advocates for
Justice; Garment Workers Center; Koreatown Immigrant Workers
AB 2416 (Stone)
Page 20 of ?
Alliance; Los Angeles Alliance for a New Economy; Maintenance
Cooperation Trust Fund; National Day Laborer Organizing Network;
National Employment Law Project; National Immigration Law
Center; National Lawyers Guild, Labor & Employment Committee;
Sunrise Floor Systems LLC; Wage Justice Center; Women's
Employment Rights Clinic, Golden Gate University School of Law;
Workplace Justice Initiative
Opposition : Acclamation Insurance Management Services; Air
Conditioning Trade Association; Allied Managed Care; Associated
Builders and Contractors of California; Associated Builders and
Contractors - San Diego Chapter; 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; 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
AB 2416 (Stone)
Page 21 of ?
Contractors Association; Western Growers Association; one
individual
HISTORY
Source : Service Employees International Union California
Related Pending Legislation : None Known
Prior Legislation :
AB 1164 (Lowenthal, 2013) See Background.
AB 469 (Swanson, Ch. 655, Stats. 2011) See Comment 6.
Prior Vote :
Assembly Floor (Ayes 43, Noes 27)
Assembly Committee on Appropriations (Ayes 12, Noes 5)
Assembly Committee on Judiciary (Ayes 7, Noes 3)
Assembly Committee on Labor and Employment (Ayes 5, Noes 2)
**************