Existing law provides it is the continuing duty of the Industrial Welfare Commission to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees. Existing law establishes the Division of Labor Standards Enforcement in the Department of Industrial Relations for the enforcement of labor laws, including orders of the commission. Existing law, subject to certain exceptions, prohibits an employer from requiring an employee to work more than 5 hours per day without providing a meal period and, notwithstanding that provision, authorizes the commission to adopt a working condition order permitting a meal period to commence after 6 hours of work if the order is consistent with the health and welfare of affected employees. Existing law, except as provided in that described meal period provision, authorizes the commission to adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers. Existing law requires the commission, by July 1, 2000, to adopt wage, hours, and working condition orders necessary to ensure fairness in the establishment of employee workweek schedules. Existing law further requires the commission, by July 1, 2000, to conduct reviews of wages, hours, and working conditions in specified industries and to adopt or modify regulations necessary to protect the health, safety, and welfare of workers in those industries. Existing wage orders of the commission provide that employees in the health care industry who work shifts in excess of 8 total hours in a workday may voluntarily waive their right to 1 of their 2 meal periods in a prescribed manner. Existing law prohibits an employer from requiring an employee to work during a meal or rest or recovery period mandated by an applicable statute, or applicable regulation, standard, or order of the commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health, and establishes penalties for an employers failure to provide a mandated meal or rest or recovery period.

This bill would provide that the health care employee meal period waiver provisions in those existing wage orders were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable. The bill would state that the bill is declarative of, and clarifies, existing law.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law provides it is the continuing duty of the Industrial Welfare Commission to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees. Existing law establishes the Division of Labor Standards Enforcement in the Department of Industrial Relations for the enforcement of labor laws, including orders of the commission. Existing law, subject to certain exceptions, prohibits an employer from requiring an employee to work more than 5 hours per day without providing a meal period and, notwithstanding that provision, authorizes the commission to adopt a working condition order permitting a meal period to commence after 6 hours of work if the order is consistent with the health and welfare of affected employees. Existing law, except as provided in that described meal period provision, authorizes the commission to adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers. Existing law requires the commission, by July 1, 2000, to adopt wage, hours, and working condition orders necessary to ensure fairness in the establishment of employee workweek schedules. Existing law further requires the commission, by July 1, 2000, to conduct reviews of wages, hours, and working conditions in specified industries and to adopt or modify regulations necessary to protect the health, safety, and welfare of workers in those industries. Existing wage orders of the commission provide that employees in the health care industry who work shifts in excess of 8 total hours in a workday may voluntarily waive their right to 1 of their 2 meal periods in a prescribed manner. Existing law prohibits an employer from requiring an employee to work during a meal or rest or recovery period mandated by an applicable statute, or applicable regulation, standard, or order of the commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health, and establishes penalties for an employers failure to provide a mandated meal or rest or recovery period.

This bill would provide that the health care employee meal period waiver provisions in those existing wage orders were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable. The bill would state that the bill is declarative of, and clarifies, existing law.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law provides it is the continuing duty of the Industrial Welfare Commission to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees. Existing law establishes the Division of Labor Standards Enforcement in the Department of Industrial Relations for the enforcement of labor laws, including orders of the commission. Existing law, subject to certain exceptions, prohibits an employer from requiring an employee to work more than 5 hours per day without providing a meal period and, notwithstanding that provision, authorizes the commission to adopt a working condition order permitting a meal period to commence after 6 hours of work if the order is consistent with the health and welfare of affected employees. Existing law, except as provided in that described meal period provision, authorizes the commission to adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers. Existing law requires the commission, by July 1, 2000, to adopt wage, hours, and working conditions condition orders necessary to ensure fairness in the establishment of employee workweek schedules. Existing law further requires the commission, by July 1, 2000, to conduct reviews of wages, hours, and working conditions in specified industries and to adopt or modify regulations necessary to protect the health, safety, and welfare of workers in those industries. Existing wage orders of the commission provide that employees in the health care industry who work shifts in excess of 8 total hours in a workday may voluntarily waive their right to 1 of their 2 meal periods in a prescribed manner. Existing law prohibits an employer from requiring an employee to work during a meal or rest or recovery period mandated by an applicable statute, or applicable regulation, standard, or order of the commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health, and establishes penalties for an employers failure to provide a mandated meal or rest or recovery period.

This bill would provide that the health care employee meal period waiver provisions in those existing wage orders were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable. The bill would state that the bill is declarative of, and clarifies, existing law.

The Alcoholic Beverage Control Act authorizes the issuance of a special license for the sale of beer or wine on a temporary basis to a licensee for a picnic, social gathering, or similar occasion. The act also prohibits alcoholic beverages from being delivered to on-sale and off-sale licensees on Sunday or and prohibits delivery on any other day except between the hours of 3 a.m. and 8 p.m., and further provides that a violation of this provision is a misdemeanor. 8 P.M..

This bill instead would allow beer wholesalers and specified beer manufacturers to deliver beer to holders of the special license described above between the hours of 8 6 a.m. and 8 2 p.m. on Sunday. The bill would make conforming technical changes.

The Alcoholic Beverage Control Act authorizes the issuance of a special license for the sale of beer or wine on a temporary basis to a licensee for a picnic, social gathering, or similar occasion. The act also prohibits alcoholic beverages from being delivered to on-sale and off-sale licensees on Sunday or on any other day except between the hours of 3 a.m. and 8 p.m., and further provides that a violation of this provision is a misdemeanor.

This bill would allow beer wholesalers to deliver beer to holders of the special license described above between the hours of 8 a.m. and 8 p.m. on Sunday. The bill would make conforming technical changes.

 UNFINISHED BUSINESS  

Bill No: SB 327

Author: Hernandez (D), et al.

Amended: 9/9/15

Vote: 27 - Urgency

PRIOR VOTES NOT RELEVANT

ASSEMBLY FLOOR: Not available

SUBJECT: Industrial Welfare Commission: wage orders: meal periods

SOURCE: United Nurses Associations of California/Union of Health Care Professionals

DIGEST: This bill clarifies that health care employee meal period waiver provisions in existing Industrial Welfare Commission wage orders have been valid and enforceable since October 1, 2000.

Assembly Amendments gut and amend the previous contents of this bill relating to alcoholic beverages in order to address the meal period waiver provisions issue.

ANALYSIS:

Existing law:

1. Prohibits an employer from requiring an employee to work more than five hours per day without providing a meal period of not less than 30 minutes, except that if the total workday is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee.

2. Prohibits an employer from requiring an employee to work more than 10 hours per day without providing a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent only if the first meal period was not waived.

3. Exempts specified employees covered by a valid collective bargaining agreement that expressly provides for the wages, hours of work, and working conditions of employees, as specified.

4. Establishes the Industrial Welfare Commission (IWC) to regulate wages, hours and working conditions of employees in California and authorizes the Commission to adopt a working condition order permitting a meal period to commence after six hours of work if the commission determines that the order is consistent with the health and welfare of the affected employees. [Labor Code §512 (b)]

This bill:

1. Provides that, notwithstanding any other law, the healthcare employee meal period waiver provisions of specified Wage Orders of the IWC were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable.

2. Provides that this provision is declarative of and clarifies existing law.

3. Makes related legislative findings and declarations.

4. Contains an urgency clause.

Background

The Industrial Welfare Commission: Existing law requires the IWC to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees. Existing law, except as provided in that described meal period provision, authorizes the Commission to adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers. The Division of Labor Standards Enforcement, within the Department of Industrial Relations, is responsible for the enforcement of labor laws, including orders

of the Commission. IWC wage orders must be posted by all employers in an area frequented by employees, where they may be easily read during the workday.

Gerard v. Orange Coast Memorial Medical Center: This bill responds to a recent decision by the California Court of Appeal regarding the provision of meal periods for employees in the health care industry. In Gerard v. Orange Coast Memorial Medical Center, 234 Cal. App. 4th 285 (2015), the California Court of Appeal concluded that certain language contained in a Wage Order of the Industrial Welfare Commission was invalid to the extent it conflicts with Labor Code Section 512. Specifically, Labor Code Section 512 prohibits waiver of the second meal period when an employee works more than 12 hours. Wage Orders 4 and 5, section 11(d) has allowed such waivers for employees in the healthcare industry since 1993. The Court also concluded that its ruling should be applied retroactively.

The court resolved this conflict in favor of the statutory provisions, stating:

"[T]here is a conflict between section 11(D) and section 512(a). As our Supreme Court recognized…section 11(D) permits health care workers to waive their second meal periods, even on shifts in excess of 12 hours, and thus section 11(D) 'conflicts' with section 512(a), which limits second meal period waivers to shifts of 12 hours or less…

…[T]he conflict between section 11(D) and section 512(a) creates an unauthorized additional exception to the general rule set out in section 512(a), beyond the express exception for waivers on shifts of no more than 12 hours…

…We see nothing in this legislative history to support hospital's argument the additional regulatory exception embodied in section 11(D) for shifts longer than 12 hours is consistent with the Legislature's intent. To the contrary, everything in this legislative history evidences the intent to prohibit the IWC from amending its wage orders in ways that conflict with meal period requirements in section 512, including the proviso second meal periods may be waived only if the total hours worked is less than 12 hours."

In addition, the Court of Appeal held that the plaintiffs were entitled to seek premium pay under Labor Code Section 226.7 for any failure by the hospital to provide mandatory second meal periods before the decision that falls within the governing three-year statutory period. The Court noted, "There is no compelling reason of fairness or public policy that warrants an exception to the general rule of retroactivity for our decision partially invalidating section 11(D)."

The California Supreme Court granted review on May 20, 2015. The Court stated the issues on review as follows:

1. Is the health care industry meal period waiver provision in section 11(D) of Industrial Welfare Commission Order No. 5-2001 invalid under Labor Code section 512, subdivision (a)?

2. Should the decision of the Court of Appeal partially invalidating the Wage Order be applied retroactively?

Stated need for the bill: Section 11(D) of Wage Order 5-2001 first became effective on October 1, 2000. However, prior to that date, the Legislature passed and the Governor signed SB 88 (Sher, Chapter 492) enacting Labor Code Section 516, which reads as follows:

"Except as provided in Section 512, the IWC may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers."

Therefore, the provisions of the statute and of the Wage Order appear to conflict on their face. The Wage Order language authorizes health care employees to waive their second meal period for any shift over eight hours. However, the language of the statute provides that the second meal period may be waived only if the total hours worked does not exceed 12 hours.

Proponents of this bill argue the need for clarification in order to preserve the status quo preferred by both hospitals and their employees for over 20 years, as confirmed by the IWC in 2000. This bill provides that the health care employee meal period wavier provisions in the existing wage orders were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable. This bill states that it is declarative of, and clarifies, existing law.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 9/11/15)

United Nurses Association of California/Union of Health Care Professionals (source)

Adventist Health

AFSCME

Anaheim Regional Medical Center

Arroyo Grande Community Hospital

Aurora Vista del Mar Hospital

Avanti Hospitals

Bakersfield Memorial Hospital

Beverly Hospital

California Children's Hospital Association

California Employment Law Council

California Hospital Association

California Hospital Medical Center, Los Angeles

California Labor Federation

California Retailers Association

Cedars-Sinai Medical Center

Citrus Valley Health Partners

City of Hope

Civil Justice Association of California

Community Hospital of San Bernardino

Community Medical Centers

Corona Regional Medical Center

Delano Regional Medical Center

Desert Valley Hospital

Dignity Health

Dominican Hospital, Santa Cruz

El Camino Hospital

Enloe Medical Center

French Hospital Medical Center, San Luis Obispo

Gardens Regional Hospital and Medical center

Glendale Adventist Medical Center

Glendale Memorial Hospital & Health Center, Glendale

Glenn Medical Center

Good Samaritan Hospital

Hospital Corporation of America

Keck Hospital of USC

Kindred Hospital, Riverside/Ontario/Rancho Cucamonga

Kindred Hospital, San Francisco Bay Area

Lodi Memorial Health

Loma Linda University Health

Lompoc Valley Medical Center

Long Beach and Community Hospital Long Beach

Long Beach Memorial

Los Robles Hospital & Medical Center

Madera Community Hospital

Mammoth Hospital

Marian Region Medical Center, Santa Maria/West Santa Maria

Marin General Hospital

Marina Del Rey Hospital

Mark Twain St. Joseph's Hospital, San Andreas

Marshall Medical center

Memorial Care Health System

Mercy General, Sacramento

Mercy Hospital, Folsom/Bakersfield

Mercy Medical Center, Merced/Mt. Shasta/Redding

Mercy San Juan Medical Center, Carmichael

Mercy Southwest Hospital, Bakersfield

Methodist Hospital of Sacramento

Miller Children's and Women's Hospital

Monterey Park Hospital

Northridge Hospital Medical Center

O’Connor Hospital

Orange Coast Memorial Medical Center

Palo Verde Hospital

Palomar Health

Parkview Community Hospital Medical Center

Physicians for Healthy Hospitals

Pioneers Memorial Healthcare District

Providence Health & Services

Redlands Community Hospital

Saddleback Memorial Medical Center

Saint Agnes Medical Center

Saint Francis Memorial Hospital, San Francisco

San Antonio Regional Hospital

San Gorgonio Memorial Hospital

San Joaquin Valley Rehabilitation Hospital

Scripps Health

SEIU United Healthcare Workers West

Sequoia Hospital, Redwood City

Seton Medical Center

Sharp HealthCare

Sidley Austin LLP

Sierra Nevada Memorial Hospital, Grass Valley

Southwest Healthcare System Murrieta & Wildomar

St. Bernadine Medical Center, San Bernardino

St. Elizabeth Community Hospital, Red Bluff

St. John's Pleasant Valley Hospital, Camarillo

St. John's Regional Medical Center, Oxnard

St. Joseph's Behavioral Health Center, Stockton

St. Joseph's Health, Orange

St. Joseph's Medical Center, Stockton

St. Jude Medical Center, Fullerton

St. Mary Medical Center, Apple Valley

St. Mary's Medical Center, Long Beach/ San Francisco

Stanford Health Care

Stanford Health Care – Valley Care

Sutter Health

Torrance Memorial Medical Center

USC Norris Cancer Hospital

USC Verdugo Hills Hospital

Valley Children’s Hospital, Madera

Whittier Hospital Medical Center

Woodland Healthcare, Woodland

14 individuals

OPPOSITION: (Verified 9/11/15)

Consumer Attorneys of California

ARGUMENTS IN SUPPORT: The California Hospital Association supports this

bill, stating that this bill will clarify that employees in the healthcare industry

can continue to waive one of their two meal periods pursuant to IWC Wage Orders

4 and 5, even when their shift exceeds 12 hours. Absent clarification that these

wage orders have been valid since they were adopted in June 2000, hospitals will

be liable for a missed meal period premium on any day an employee worked even

one minute over the 12-hour mark. They argue that this could result in millions of

dollars in liability, as well as scheduling changes throughout the hospital industry.

Proponents further argue that while the California Supreme Court recently accepted review of the Gerard case, because it is unclear when and how the Supreme Court will resolve the case, hospitals are faced with the decision whether to immediately and significantly change their scheduling practices, which may include extending the shift to 13 hours to accommodate a second, off-duty meal period, reverting to eight-hour shifts or taking some other action to minimize potential liability moving forward. They argue that as the Supreme Court evaluates the legal issues raised in the Gerard case, clarification of the law by the legislature is extremely important to the Court’s analysis.

Proponents also argue the benefits of the flexibility of alternate work schedules, which allows for greater staffing flexibility and better patient care. Proponents further state that rather than risk overturning 22 years of settled regulation, they are asking for a legislative solution that would simply codify the existing regulation into law.

ARGUMENTS IN OPPOSITION: The Consumer Attorneys of California (CAOC) opposes this bill unless it is amended to be prospective only, and argue that should this bill be enacted, it would impact pending litigation before the California Supreme Court, overturn a recent California Appellate Court decision, Gerard v. Orange Coast Memorial Medical Center 234 Cal. App. 4th 285 (2015), and affected workers could lose wages as a result of its passage. CAOC argues that it is simply against public policy to legislatively affect a consumer’s existing legal right in a manner that retroactively guts a claim that was already filed, in good faith, with the law of the date of filing applicable.

With regards to the pending litigation concern, CAOC argues that the proposed language would expressly make the invalidated wage order valid and would state that it is “declaratory of existing law.” They argue that this bill is designed to impact this pending court case. Further, CAOC argues that the effect of this legislation granting hospitals retroactive relief from liability for unpaid wages, could be to deny workers past wages they have already earned. They argue that the Court has already decided to issue a ruling on these issues and they think it is best to wait for the Supreme Court to issue its ruling in Gerard. CAOC argues that these issues could be decided as early as next year and rather than introduce a later gut and amend, they feel that the best action would be to wait for the Supreme Court to issue its ruling.

Prepared by: Alma Perez / L. & I.R. / (916) 651-1556

9/11/15 17:31:43

**** END ****

SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS

Senator Tony Mendoza, Chair

2015 - 2016 Regular

Bill No: SB 327 Hearing Date: September 11, 2015

Subject: Industrial Welfare Commission: wage orders: meal periods.

KEY ISSUE

Should the Legislature clarify that health care employee meal period waiver provisions in existing Industrial Welfare Commission wage orders have been valid and enforceable since October 1, 2000 in order to address a recent court ruling?

ANALYSIS

Existing law:

(Labor Code §512)

1. Prohibits an employer from requiring an employee to work more than five hours per day without providing a meal period of not less than 30 minutes, except that if the total workday is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee.

2. Prohibits an employer from requiring an employee to work more than 10 hours per day without providing a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent only if the first meal period was not waived.

3. Exempts specified employees covered by a valid collective bargaining agreement that expressly provides for the wages, hours of work, and working conditions of employees, as specified.

4. Establishes the Industrial Welfare Commission (IWC) to regulate wages, hours and working conditions in California and authorizes the Commission to adopt a working condition order permitting a meal period to commence after six hours of work if the commission determines that the order is consistent with the health and welfare of the affected employees. [Labor Code §512 (b)]

This Bill would enact provisions of law related to the provision of meal periods to employees in the health care industry.

Specifically, this bill:

1. Provides that, notwithstanding any other law, the healthcare employee meal period waiver provisions of specified Wage Orders of the Industrial Welfare Commission (IWC) were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable.

2. Provide that this provision is declarative of and clarifies existing law.

3. Makes related legislative findings and declarations.

4. Contains an urgency clause.

COMMENTS

1. Background: Industrial Welfare Commission

Existing law requires the Industrial Welfare Commission (IWC) to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees. Existing law, except as provided in that described meal period provision, authorizes the commission to adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers. The Division of Labor Standards Enforcement, within the Department of Industrial Relations for enforcement of labor laws, including orders of the commission. IWC wage orders must be posted by all employers in an area frequented by employees, where they may be easily read during the workday.

Existing law requires the commission, by July 1, 2000, to adopt wage, hours, and working conditions orders necessary to ensure fairness in the establishment of employee workweek schedules. Existing law further requires the commission, by July 1, 2000, to conduct reviews of wages, hours, and working conditions in specified industries and to adopt or modify regulations necessary to protect the health, safety, and welfare of workers in those industries. Existing wage orders of the commission provide that employees in the health care industry who work shifts in excess of 8 total hours in a workday may voluntarily waive their right to 1 of their 2 meal periods in a prescribed manner. Existing law prohibits an employer from requiring an employee to work during a meal or rest or recovery period mandated by an applicable statute, or applicable regulation, standard, or order of the commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health, and establishes penalties for an employer’s failure to provide a mandated meal or rest or recovery period.

The IWC is currently not in operation. The Division of Labor Standards Enforcement (DLSE) continues to enforce the provisions of the wage orders.

2. Gerard v. Orange Coast Memorial Medical Center

This bill responds to a recent decision by the California Court of Appeal regarding the provision of meal periods for employees in the health care industry. In Gerard v. Orange Coast Memorial Medical Center, 234 Cal. App. 4th 285 (2015), the California Court of Appeal concluded that certain language contained in a Wage Order of the Industrial Welfare Commission was invalid to the extent it conflicts with Labor Code Section 512. Specifically, Labor Code section 512 prohibits waiver of the second meal period when an employee works more than 12 hours. Wage Orders 4 and 5, section 11(d) has allowed such waivers for employees in the healthcare industry since 1993. The Court also concluded that its ruling should be applied retroactively.

Labor Code Section 512(a) provides in pertinent part as follows:

"An employer may not employ an employee for a work period of more than 10 hours per

day without providing the employee with a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived."

Section 512 was enacted in 1999, as part of Assembly Bill 60 which, among other things, codified California's daily overtime requirement and required the IWC to review its wage orders and readopt orders conforming to the Legislature’s expressed intentions. Section 512 set out statutory meal period requirements for the first time, which previously had been contained only in the IWC Wage Orders. Thereafter, the IWC held public hearings and adopted revised wage orders for each industry, including the current version of Wage Order No. 4 and Wage Order No. 5. The IWC had originally modified the meal waiver requirements in wage order Nos. 4 and 5 in 1993, in response to a health care industry petition to permit its employees to waive a second meal period on longer shifts in order to leave earlier. The IWC later extended similar waiver rights to all employees covered by these wage orders and three others, but that extension was among many wage order changes repealed (under AB 60) in 1999.

Thereafter, health care representatives and other stakeholders persuaded the IWC to at least preserve expanded waiver rights for their industry, along the lines of those originally afforded in 1993. Accordingly, wage orders Nos. 4-2001 and 5-2001 each contains a provision absent from other wage orders, permitting health care employees to waive one of two meal periods on longer shifts. Specifically, Section 11(D) of Industrial Welfare Commission Wage Orders 4-2001 and 5-2001 states in relevant part:

"Notwithstanding any other provision of this order, employees in the health care industry who work shifts in excess of eight (8) total hours in a workday may voluntarily waive their right to one of their two meal periods."

Wage Order 4 and 5 define "health care industry" to mean "hospitals, skilled nursing facilities, intermediate care and residential care facilities, convalescent care institutions, home health agencies, clinics operating 24 hours per day, and clinics performing surgery, urgent care, radiology, anesthesiology, pathology, neurology or dialysis." In addition, Wage Order 4 and 5 define "employees in the health care industry" to mean any of the following:

• Employees in the health care industry providing patient care;

• Employees in the health care industry working in a clinical or medical department, including pharmacists dispensing prescriptions in any practice setting;

• Employees in the health care industry working primarily or regularly as a member of a patient care delivery team; or

• Licensed veterinarians, registered veterinary technicians and unregistered animal health technicians providing patient care.

The court resolved this conflict in favor of the statutory provisions, stating:

"[T]here is a conflict between section 11(D) and section 512(a). As our Supreme Court recognized…section 11(D) permits health care workers to waive their second meal periods, even on shifts in excess of 12 hours, and thus section 11(D) 'conflicts' with section 512(a), which limits second meal period waivers to shifts of 12 hours or less…

…[T]he conflict between section 11(D) and section 512(a) creates an unauthorized additional exception to the general rule set out in section 512(a), beyond the express exception for waivers on shifts of no more than 12 hours…

…We see nothing in this legislative history to support hospital's argument the additional regulatory exception embodied in section 11(D) for shifts longer than 12 hours is consistent with the Legislature's intent. To the contrary, everything in this legislative history evidences the intent to prohibit the IWC from amending its wage orders in ways that conflict with meal period requirements in section 512, including the proviso second meal periods may be waived only if the total hours worked is less than 12 hours."

In addition, the Court of Appeal held that the plaintiffs were entitled to seek premium pay under Labor Code section 226.7 for any failure by the hospital to provide mandatory second meal periods before the decision that falls within the governing three-year statutory period. The Court noted, "there is no compelling reason of fairness or public policy that warrants an exception to the general rule of retroactivity for our decision partially invalidating section 11(D)."

The California Supreme Court granted review on May 20, 2015. The Court stated the issues on review as follows:

1. Is the health care industry meal period waiver provision in section 11(D) of Industrial Welfare Commission Order No. 5-2001 invalid under Labor Code section 512, subdivision (a)?

2. Should the decision of the Court of Appeal partially invalidating the Wage Order be applied retroactively?

3. Need for this bill?

Section 11(D) of Wage Order 5-2001 first became effective on October 1, 2000. However, prior to that date, the Legislature passed and the Governor signed Senate Bill 88 as an urgency measure that became effective upon signature. SB 588 enacted Labor Code section 516, which reads as follows:

"Except as provided in Section 512, the IWC may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers."

Therefore, the provisions of the statute and of the Wage Order appear to conflict on their face. The Wage Order language authorizes health care employees to waive their second meal period for any shift over eight hours. However, the language of the statute provides that the second meal period may be waived only if the total hours worked does not exceed 12 hours.

Proponents of the measure argue the need for clarification in order to preserve the status quo preferred by both hospitals and their employees for over 20 years, as confirmed by the IWC in 2000. This bill would provide that the health care employee meal period wavier provisions in the existing wage orders were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable. The bill would state that it is declarative of, and clarifies, existing law.

4. Proponent Arguments:

The California Hospital Association supports this measure, stating:

"This bill will clarify that employees in the healthcare industry can continue to waive one of their two meal periods pursuant to Wage Orders 4 and 5-2001, even when their shift exceeds 12 hours. A recent court ruling, Gerard v. Orange Coast Memorial Medical Center, could jeopardize this option, thus jeopardizing the availability to 12-hour shifts. Absent clarification that Wage Orders 4 and 5, section 11(D) has been valid since it was adopted by the Industrial Welfare Commission in June 2000, hospitals will be liable for a missed meal period premium on any day an employee worked even 1 minute over the 12-hour mark. This could result in millions of dollars in liability, as well as scheduling changes throughout the hospital industry…

…While the California Supreme Court recently accepted review of the Gerard case, it nonetheless poses a significant adverse impact on healthcare employers and employees, particularly those working 12-hour shifts who want to waive one of their meal periods so that they do not have to prolong their workday by 30 minutes. Because it is unclear when and how the Supreme Court will resolve the case, hospitals are faced with the decision whether to immediately and significantly change their scheduling practices, which may include extending the shift to 13 hours to accommodate a second, off-duty meal period, reverting to 8-hour shifts or taking some other action to minimize potential liability moving forward. Further, while the Gerard appellate decision has been de-published similar cases have already been filed and thus without clarification of the law, hospitals currently risk facing expensive class action litigation and potential retroactive liability in the millions of dollars. As the Supreme Court evaluates the legal issues raised in the Gerard case, clarification of the law by the legislature is extremely important to the Court’s analysis. Thus, it is critically important for the Legislature to reject the Court of Appeal decision and the rationale on which it is based."

The United Nurses Association of California/Union of Health Care Professionals (UNAC), supports this measure, stating:

"Under this wage order provision, UNAC members have for years enjoyed the flexibility of alternate work schedules, which allows for greater staffing flexibility and better patient care. Patient outcomes are dramatically improved in environments where the nurses and other health care professionals can place priority on the needs of their patients without interruption by an arbitrary meal period when the shift runs long. (RNs are generally able to eat during work time in break rooms.) In addition, allowing health care workers the option of working longer shifts enables them to take extra days off during the work week, which in turn ensures that they are fully rested when they return to work to provide better patient care. Moreover, hospitals have enjoyed the ability to have fewer shift changeovers.

However, in a recent decision, the appellate court declared Section 11(D) invalid because it authorized second meal waivers for shifts longer than 12 hours. This decision completely upends well-established staffing schedules and will result in a severe disruption of the lives of our members, many of whom have built a schedule of work, child care, and other obligations around the ability to waive a second meal period."

Similarly, the Service Employees International Union, United Healthcare Workers West (SEIU-UHW) supports this bill, stating:

"Twelve hour shifts are overwhelming preferred by healthcare workers because they work a shorter work week (3 days on, 4 days off). They spend less time commuting and more time with family and friends. The enhanced work-life balance increases job satisfaction and less burn-out. This is the benefit that nurses cite most often in surveys about their shift preferences. Having four full days away from the job can allow you to enjoy your personal life to a greater extent or spend more time with family. Hospitals find that this in turn translates into better staff morale, less staff turnover, and reduced absenteeism…Rather than risk overturning 22 years of settled regulation we are asking for a legislative solution that would simply codify the existing regulation into law."

5. Opponent Arguments:

The Consumer Attorneys of California opposes this measure unless it is amended to be prospective only, stating:

“Should this bill be enacted, it would impact pending litigation before the California Supreme Court, overturn a recent California Appellate Court decision, Gerard v. Orange Coast Memorial Medical Center 234 Cal. App. 4th 285 (2015), and affected workers could lose wages as a result of its passage.

CAOC has always opposed, and will continue to oppose, any effort to affect pending litigation. It is simply against public policy to legislatively affect a consumer’s existing legal right in a manner that retroactively guts a claim that was already filed, in good faith, with the law of the date of filing applicable.”

CAOC further argues that SB 327 impacts pending litigation, stating:

“The California Supreme Court granted review on May 20, 2015 so this is pending litigation. The Court stated the issues on review as follows: (1) Is the health care industry meal period waiver provision in section 11(D) of Industrial Wage Commission Order No. 5-2001 invalid under Labor Code section 512, subdivision (a)?  (2) Should the decision of the Court of Appeal partially invalidating the Wage Order be applied retroactively? The proposed language would expressly make the invalidated wage order valid and would state that it is “declaratory of existing law.” This bill is designed to impact this pending court case.”

According to CAOC, the effect of this legislation, granting hospitals retroactive relief from liability for unpaid wages, could be to deny workers past wages they have already earned. They argue that the Court has already decided to issue a ruling on these issues and they think it is best to wait for the Supreme Court to issue its ruling in Gerard. CAOC argues that these issues could be decided as early as next year and rather than introduce a later gut and amend, they feel that the best action would be to wait for the Supreme Court to issue its ruling.

SUPPORT

United Nurses Association of California/Union of Health Care Professionals (Sponsor)

Adventist Health

AFSCME

Anaheim Regional Medical Center

Arroyo Grande Community Hospital

Aurora Vista del Mar Hospital

Bakersfield Memorial Hospital

Beverly Hospital

California Children's Hospital Association

California Employment Law Council

California Hospital Association

California Hospital Medical Center, Los Angeles

California Labor Federation, AFL-CIO

California Retailers Association

Cedars-Sinai Medical Center

Citrus Valley Health Partners

City of Hope

Civil Justice Association of California

Community Hospital of San Bernardino

Community Medical Centers

Corona Regional Medical Center

Delano Regional Medical Center

Desert Valley Hospital

Dignity Health

Dominican Hospital, Santa Cruz

El Camino Hospital

Enloe Medical Center

French Hospital Medical Center, San Luis Obispo

Gardens Regional Hospital and Medical center

Glendale Adventist Medical Center

Glendale Memorial Hospital & Health Center, Glendale

Glenn Medical Center

Good Samaritan Hospital

Hospital Corporation of America

Keck Hospital of USC

Kindred Hospital, Riverside/Ontario/Rancho Cucamonga

Kindred Hospital, San Francisco Bay Area

Lodi Memorial Health

Loma Linda University Health

Lompoc Valley Medical Center

Long Beach and Community Hospital Long Beach

Long Beach Memorial

Los Robles Hospital & Medical Center

Madera Community Hospital

Mammoth Hospital

Marian Region Medical Center, Santa Maria/West Santa Maria

Marin General Hospital

Marina Del Rey Hospital

Mark Twain St. Joseph's Hospital, San Andreas

Marshall Medical center

Memorial Care Health System

Mercy General, Sacramento

Mercy Hospital, Folsom/Bakersfield

Mercy Medical Center, Merced/Mt. Shasta/Redding

Mercy San Juan Medical Center, Carmichael

Mercy Southwest Hospital, Bakersfield

Methodist Hospital of Sacramento

Miller Children's and Women's Hospital

Monterey Park Hospital

Northridge Hospital Medical Center

O’Connor Hospital

Orange Coast Memorial Medical Center

Palo Verde Hospital

Palomar Health

Parkview Community Hospital Medical Center

Physicians for Healthy Hospitals

Pioneers Memorial Healthcare District

Providence Health & Services

Redlands Community Hospital

Saddleback Memorial Medical Center

Saint Agnes Medical Center

Saint Francis Memorial Hospital, San Francisco

San Antonio Regional Hospital

San Gorgonio Memorial Hospital

San Joaquin Valley Rehabilitation Hospital

Scripps Health

SEIU United Healthcare Workers West

Sequoia Hospital, Redwood City

Seton Medical Center

Sharp HealthCare

Sidley Austin LLP

Sierra Nevada Memorial Hospital, Grass Valley

Southwest Healthcare System Murrieta & Wildomar

St. Bernadine Medical Center, San Bernardino

St. Elizabeth Community Hospital, Red Bluff

St. John's Pleasant Valley Hospital, Camarillo

St. John's Regional Medical Center, Oxnard

St. Joseph's Behavioral Health Center, Stockton

St. Joseph's Health, Orange

St. Joseph's Medical Center, Stockton

St. Jude Medical Center, Fullerton

St. Mary Medical Center, Apple Valley

St. Mary's Medical Center, Long Beach/ San Francisco

Stanford Health Care

Stanford Health Care – Valley Care

Sutter Health

Torrance Memorial Medical Center

USC Norris Cancer Hospital

USC Verdugo Hills Hospital

Whittier Hospital Medical Center

Woodland Healthcare, Woodland

14-individuals

OPPOSITION

Consumer Attorneys of California

-- END –

 UNFINISHED BUSINESS  

Bill No: SB 327

Author: Hernandez (D), et al.

Amended: 9/9/15

Vote: 27 - Urgency

PRIOR VOTES NOT RELEVANT

SENATE LABOR AND IND. REL. COMMITTEE: 4-0, 9/11/15 (pursuant to Senate Rule 29.10)

AYES: Mendoza, Stone, Leno, Mitchell

NO VOTE RECORDED: Jackson

ASSEMBLY FLOOR: Not available

SUBJECT: Industrial Welfare Commission: wage orders: meal periods

SOURCE: United Nurses Associations of California/Union of Health Care Professionals

DIGEST: This bill clarifies that health care employee meal period waiver provisions in existing Industrial Welfare Commission wage orders have been valid and enforceable since October 1, 2000.

Assembly Amendments gut and amend the previous contents of this bill relating to alcoholic beverages in order to address the meal period waiver provisions issue.

ANALYSIS:

Existing law:

1. Prohibits an employer from requiring an employee to work more than five hours per day without providing a meal period of not less than 30 minutes, except that if the total workday is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee.

2. Prohibits an employer from requiring an employee to work more than 10 hours per day without providing a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent only if the first meal period was not waived.

3. Exempts specified employees covered by a valid collective bargaining agreement that expressly provides for the wages, hours of work, and working conditions of employees, as specified.

4. Establishes the Industrial Welfare Commission (IWC) to regulate wages, hours and working conditions of employees in California and authorizes the Commission to adopt a working condition order permitting a meal period to commence after six hours of work if the commission determines that the order is consistent with the health and welfare of the affected employees. [Labor Code §512 (b)]

This bill:

1. Provides that, notwithstanding any other law, the healthcare employee meal period waiver provisions of specified Wage Orders of the IWC were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable.

2. Provides that this provision is declarative of and clarifies existing law.

3. Makes related legislative findings and declarations.

4. Contains an urgency clause.

Background

The Industrial Welfare Commission: Existing law requires the IWC to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees. Existing law, except as provided in that described meal period provision, authorizes the Commission to adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers. The Division of Labor Standards Enforcement, within the Department of Industrial Relations, is responsible for the enforcement of labor laws, including orders

of the Commission. IWC wage orders must be posted by all employers in an area frequented by employees, where they may be easily read during the workday.

Gerard v. Orange Coast Memorial Medical Center: This bill responds to a recent decision by the California Court of Appeal regarding the provision of meal periods for employees in the health care industry. In Gerard v. Orange Coast Memorial Medical Center, 234 Cal. App. 4th 285 (2015), the California Court of Appeal concluded that certain language contained in a Wage Order of the Industrial Welfare Commission was invalid to the extent it conflicts with Labor Code Section 512. Specifically, Labor Code Section 512 prohibits waiver of the second meal period when an employee works more than 12 hours. Wage Orders 4 and 5, section 11(d) has allowed such waivers for employees in the healthcare industry since 1993. The Court also concluded that its ruling should be applied retroactively.

The court resolved this conflict in favor of the statutory provisions, stating:

"[T]here is a conflict between section 11(D) and section 512(a). As our Supreme Court recognized…section 11(D) permits health care workers to waive their second meal periods, even on shifts in excess of 12 hours, and thus section 11(D) 'conflicts' with section 512(a), which limits second meal period waivers to shifts of 12 hours or less…

…[T]he conflict between section 11(D) and section 512(a) creates an unauthorized additional exception to the general rule set out in section 512(a), beyond the express exception for waivers on shifts of no more than 12 hours…

…We see nothing in this legislative history to support hospital's argument the additional regulatory exception embodied in section 11(D) for shifts longer than 12 hours is consistent with the Legislature's intent. To the contrary, everything in this legislative history evidences the intent to prohibit the IWC from amending its wage orders in ways that conflict with meal period requirements in section 512, including the proviso second meal periods may be waived only if the total hours worked is less than 12 hours."

In addition, the Court of Appeal held that the plaintiffs were entitled to seek premium pay under Labor Code Section 226.7 for any failure by the hospital to provide mandatory second meal periods before the decision that falls within the governing three-year statutory period. The Court noted, "There is no compelling reason of fairness or public policy that warrants an exception to the general rule of retroactivity for our decision partially invalidating section 11(D)."

The California Supreme Court granted review on May 20, 2015. The Court stated the issues on review as follows:

1. Is the health care industry meal period waiver provision in section 11(D) of Industrial Welfare Commission Order No. 5-2001 invalid under Labor Code section 512, subdivision (a)?

2. Should the decision of the Court of Appeal partially invalidating the Wage Order be applied retroactively?

Stated need for the bill: Section 11(D) of Wage Order 5-2001 first became effective on October 1, 2000. However, prior to that date, the Legislature passed and the Governor signed SB 88 (Sher, Chapter 492) enacting Labor Code Section 516, which reads as follows:

"Except as provided in Section 512, the IWC may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers."

Therefore, the provisions of the statute and of the Wage Order appear to conflict on their face. The Wage Order language authorizes health care employees to waive their second meal period for any shift over eight hours. However, the language of the statute provides that the second meal period may be waived only if the total hours worked does not exceed 12 hours.

Proponents of this bill argue the need for clarification in order to preserve the status quo preferred by both hospitals and their employees for over 20 years, as confirmed by the IWC in 2000. This bill provides that the health care employee meal period wavier provisions in the existing wage orders were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable. This bill states that it is declarative of, and clarifies, existing law.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 9/11/15)

United Nurses Association of California/Union of Health Care Professionals (source)

Adventist Health

AFSCME

Anaheim Regional Medical Center

Arroyo Grande Community Hospital

Aurora Vista del Mar Hospital

Avanti Hospitals

Bakersfield Memorial Hospital

Beverly Hospital

California Children's Hospital Association

California Employment Law Council

California Hospital Association

California Hospital Medical Center, Los Angeles

California Labor Federation

California Retailers Association

Cedars-Sinai Medical Center

Citrus Valley Health Partners

City of Hope

Civil Justice Association of California

Community Hospital of San Bernardino

Community Medical Centers

Corona Regional Medical Center

Delano Regional Medical Center

Desert Valley Hospital

Dignity Health

Dominican Hospital, Santa Cruz

El Camino Hospital

Enloe Medical Center

French Hospital Medical Center, San Luis Obispo

Gardens Regional Hospital and Medical center

Glendale Adventist Medical Center

Glendale Memorial Hospital & Health Center, Glendale

Glenn Medical Center

Good Samaritan Hospital

Hospital Corporation of America

Keck Hospital of USC

Kindred Hospital, Riverside/Ontario/Rancho Cucamonga

Kindred Hospital, San Francisco Bay Area

Lodi Memorial Health

Loma Linda University Health

Lompoc Valley Medical Center

Long Beach and Community Hospital Long Beach

Long Beach Memorial

Los Robles Hospital & Medical Center

Madera Community Hospital

Mammoth Hospital

Marian Region Medical Center, Santa Maria/West Santa Maria

Marin General Hospital

Marina Del Rey Hospital

Mark Twain St. Joseph's Hospital, San Andreas

Marshall Medical center

Memorial Care Health System

Mercy General, Sacramento

Mercy Hospital, Folsom/Bakersfield

Mercy Medical Center, Merced/Mt. Shasta/Redding

Mercy San Juan Medical Center, Carmichael

Mercy Southwest Hospital, Bakersfield

Methodist Hospital of Sacramento

Miller Children's and Women's Hospital

Monterey Park Hospital

Northridge Hospital Medical Center

O’Connor Hospital

Orange Coast Memorial Medical Center

Palo Verde Hospital

Palomar Health

Parkview Community Hospital Medical Center

Physicians for Healthy Hospitals

Pioneers Memorial Healthcare District

Providence Health & Services

Redlands Community Hospital

Saddleback Memorial Medical Center

Saint Agnes Medical Center

Saint Francis Memorial Hospital, San Francisco

San Antonio Regional Hospital

San Gorgonio Memorial Hospital

San Joaquin Valley Rehabilitation Hospital

Scripps Health

SEIU United Healthcare Workers West

Sequoia Hospital, Redwood City

Seton Medical Center

Sharp HealthCare

Sidley Austin LLP

Sierra Nevada Memorial Hospital, Grass Valley

Southwest Healthcare System Murrieta & Wildomar

St. Bernadine Medical Center, San Bernardino

St. Elizabeth Community Hospital, Red Bluff

St. John's Pleasant Valley Hospital, Camarillo

St. John's Regional Medical Center, Oxnard

St. Joseph's Behavioral Health Center, Stockton

St. Joseph's Health, Orange

St. Joseph's Medical Center, Stockton

St. Jude Medical Center, Fullerton

St. Mary Medical Center, Apple Valley

St. Mary's Medical Center, Long Beach/ San Francisco

Stanford Health Care

Stanford Health Care – Valley Care

Sutter Health

Torrance Memorial Medical Center

USC Norris Cancer Hospital

USC Verdugo Hills Hospital

Valley Children’s Hospital, Madera

Whittier Hospital Medical Center

Woodland Healthcare, Woodland

14 individuals

OPPOSITION: (Verified 9/11/15)

Consumer Attorneys of California

ARGUMENTS IN SUPPORT: The California Hospital Association supports this

bill, stating that this bill will clarify that employees in the healthcare industry

can continue to waive one of their two meal periods pursuant to IWC Wage Orders

4 and 5, even when their shift exceeds 12 hours. Absent clarification that these

wage orders have been valid since they were adopted in June 2000, hospitals will

be liable for a missed meal period premium on any day an employee worked even

one minute over the 12-hour mark. They argue that this could result in millions of

dollars in liability, as well as scheduling changes throughout the hospital industry.

Proponents further argue that while the California Supreme Court recently accepted review of the Gerard case, because it is unclear when and how the Supreme Court will resolve the case, hospitals are faced with the decision whether to immediately and significantly change their scheduling practices, which may include extending the shift to 13 hours to accommodate a second, off-duty meal period, reverting to eight-hour shifts or taking some other action to minimize potential liability moving forward. They argue that as the Supreme Court evaluates the legal issues raised in the Gerard case, clarification of the law by the legislature is extremely important to the Court’s analysis.

Proponents also argue the benefits of the flexibility of alternate work schedules, which allows for greater staffing flexibility and better patient care. Proponents further state that rather than risk overturning 22 years of settled regulation, they are asking for a legislative solution that would simply codify the existing regulation into law.

ARGUMENTS IN OPPOSITION: The Consumer Attorneys of California (CAOC) opposes this bill unless it is amended to be prospective only, and argue that should this bill be enacted, it would impact pending litigation before the California Supreme Court, overturn a recent California Appellate Court decision, Gerard v. Orange Coast Memorial Medical Center 234 Cal. App. 4th 285 (2015), and affected workers could lose wages as a result of its passage. CAOC argues that it is simply against public policy to legislatively affect a consumer’s existing legal right in a manner that retroactively guts a claim that was already filed, in good faith, with the law of the date of filing applicable.

With regards to the pending litigation concern, CAOC argues that the proposed language would expressly make the invalidated wage order valid and would state that it is “declaratory of existing law.” They argue that this bill is designed to impact this pending court case. Further, CAOC argues that the effect of this legislation granting hospitals retroactive relief from liability for unpaid wages, could be to deny workers past wages they have already earned. They argue that the Court has already decided to issue a ruling on these issues and they think it is best to wait for the Supreme Court to issue its ruling in Gerard. CAOC argues that these issues could be decided as early as next year and rather than introduce a later gut and amend, they feel that the best action would be to wait for the Supreme Court to issue its ruling.

Prepared by: Alma Perez / L. & I.R. / (916) 651-1556

9/11/15 19:26:27

**** END ****

SENATE THIRD READING

STR Bill Id:SB 327

Author:(Hernandez)

As Amended Ver:September 9, 2015

Majority vote

SENATE VOTE: Vote not relevant

SUMMARY: Enacts provisions of law related to the provision of meal periods to employees in the health care industry. Specifically, this bill:

1. Provides that, notwithstanding any other law, the healthcare employee meal period waiver provisions of specified Wage Orders of the Industrial Welfare Commission (IWC) were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable.

2. Provide that this provision is declarative of and clarifies existing law.

3. Makes related legislative findings and declarations.

4. Contains an urgency clause.

FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS: This bill responds to a recent decision by the California Court of Appeal regarding the provision of meal periods for employees in the health care industry.

In Gerard v. Orange Coast Memorial Medical Center, 234 Cal. App. 4th 285 (2015), the Court of Appeal held that certain language contained in a Wage Order of the IWC was invalid to the extent it conflicts with Labor Code Section 512.

Supporters argue that this recent decision invalidated a meal period regulation adopted over 20 years ago by the IWC for employees in the healthcare industry. The court also applied its ruling retroactively which means that hospitals which relied on the regulation are at risk for significant wage and hour class action litigation with a four year statute of limitations.

They argue that while the California Supreme Court recently accepted review of the case, it nonetheless poses a significant adverse impact on healthcare employers and employees, particularly those working 12-hour shifts who want to waive one of their meal periods so that they do not have to prolong their workday by 30 minutes. Because it is unclear when and how the Supreme Court will resolve the case, hospitals are faced with the decision whether to immediately and significantly change their scheduling practices, which may include extending the shift to 13 hours to accommodate a second, off-duty meal period, reverting to eight-hour shifts or taking some other action to minimize potential liability. They contend that, in order to preserve the status quo preferred by both hospitals and their employees for over 20 years, as confirmed by the IWC in 2000, a legislative clarification is necessary.

The Consumer Attorneys of California (CAOC) opposes this bill because it would impact pending litigation and argues that it is against public policy to legislatively affect an individual's existing legal right in such a retroactive manner. In addition, CAOC opposes this bill because granting hospitals retroactive relief from liability could deny workers past wages they have already earned, because the premium payments required for missed meal periods are wages, not penalties.

Analysis Prepared by: Benjamin Ebbink / L. & E. / (916) 319-2091 FN: 0002283

Date of Hearing: September 8, 2015

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Roger Hernández, Chair

SBPCA Bill Id:SB 327

Author:(Ed Hernandez) – As Proposed to be Amended Ver:September 8, 2015

SENATE VOTE: (vote not relevant)

SUBJECT: Industrial Welfare Commission: wage orders: meal periods

SUMMARY: Enacts provisions of law related to the provision of meal periods to employees in the health care industry. Specifically, this bill:

1. Provides that, notwithstanding any other law, the healthcare employee meal period waiver provisions of specified Wage Orders of the Industrial Welfare Commission (IWC) were valid and enforceable on and after October 1, 2000, and continue to be valid and enforceable.
   
   

2. Provide that this provision is declarative of and clarifies existing law.
   
   

3. Makes related legislative findings and declarations.
   
   

4. Contains an urgency clause.

FISCAL EFFECT: Unknown

COMMENTS: This bill responds to a recent decision by the California Court of Appeal regarding the provision of meal periods for employees in the health care industry.

In Gerard v. Orange Coast Memorial Medical Center, 234 Cal. App. 4th 285 (2015), the Court of Appeal held that certain language contained in a Wage Order of the Industrial Welfare Commission (IWC) was invalid to the extent it conflicts with Labor Code Section 512.

Labor Code Section 512(a) provides in pertinent part as follows:

"An employer may not employ an employee for a work period of more than 10 hours per

day without providing the employee with a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived."

Section 512 was enacted in 1999, as part of Assembly Bill 60 which, among other things, codified California's daily overtime requirement and required the IWC to review its wage orders and readopt orders conforming to the Legislature’s expressed intentions. Section 512 set out statutory meal period requirements for the first time, which previously had been contained only in the IWC Wage Orders.

Thereafter, the IWC held public hearings and adopted revised wage orders for each industry, including the current version of Wage Order No. 4 and Wage Order No. 5. With only limited exceptions, the IWC's 2001 wage orders embraced section 512’s meal period requirements, and did not impose different ones. Thus, as to the majority of its 2001 wage orders, the IWC did not impose a different meal period requirement than that spelled out in section 512.

The IWC had originally modified the meal waiver requirements in wage order Nos. 4 and 5 in 1993, in response to a health care industry petition to permit its employees to waive a second meal period on longer shifts in order to leave earlier. The IWC later extended similar waiver rights to all employees covered by these wage orders and three others, but that extension was among many wage order changes repealed by the Legislature (under AB 60) in 1999.

Thereafter, health care representatives and other stakeholders persuaded the IWC to at least preserve expanded waiver rights for their industry, along the lines of those originally afforded in 1993. Accordingly, wage orders Nos. 4-2001 and 5-2001 each contains a provision absent from other wage orders, permitting health care employees to waive one of two meal periods on longer shifts.

Specifically, Section 11(D) of Industrial Welfare Commission Wage Orders 4-2001 and 5-2001 states in relevant part:

"Notwithstanding any other provision of this order, employee is the health care industry who work shifts in excess of eight (8) total hours in a workday may voluntarily waive their right to one of their two meal periods."

Wage Order 4 and 5 define "health care industry" to mean "hospitals, skilled nursing facilities, intermediate care and residential care facilities, convalescent care institutions, home health agencies, clinics operating 24 hours per day, and clinics performing surgery, urgent care, radiology, anesthesiology, pathology, neurology or dialysis."

In addition, Wage Order 4 and 5 define "employees in the health care industry" to mean any of the following:

• Employees in the health care industry providing patient care;

• Employees in the health care industry working in a clinical or medical department, including pharmacists dispensing prescriptions in any practice setting;

• Employees in the health care industry working primarily or regularly as a member of a patient care delivery team; or

• Licensed veterinarians, registered veterinary technicians and unregistered animal health technicians providing patient care.

Section 11(D) of Wage Order 5-2001 first became effective on October 1, 2000. However, prior to that date, the Legislature enacted and the Governor signed Senate Bill 88 as an urgency measure that became effective upon signature. SB 588 enacted Labor Code section 516, which reads as follows:

"Except as provided in Section 512, the Industrial Welfare Commission may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers."

Therefore, the provisions of the statute and of the Wage Order appear to conflict on their face. The Wage Order language authorizes health care employees to waive their second meal period for any shift over eight hours. However, the language of the statute provides that the second meal period may be waived only if the total hours worked does not exceed 12 hours.

The court resolved this conflict in favor of the statutory provisions, stating:

"[T]here is a conflict between section 11(D) and section 512(a). As our Supreme Court recognized…section 11(D) permits health care workers to waive their second meal periods, even on shifts in excess of 12 hours, and thus section 11(D) 'conflicts' with section 512(a), which limits second meal period waivers to shifts of 12 hours or less…

…[T]he conflict between section 11(D) and section 512(a) creates an unauthorized additional exception to the general rule set out in section 512(a), beyond the express exception for waivers on shifts of no more than 12 hours…

…We see nothing in this legislative history to support hospital's argument the additional regulatory exception embodied in section 11(D) for shifts longer than 12 hours is consistent with the Legislature's intent. To the contrary, everything in this legislative history evidences the intent to prohibit the IWC from amending its wage orders in ways that conflict with meal period requirements in section 512, including the proviso second meal periods may be waived only if the total hours worked is less than 12 hours."

In addition, the Court of Appeal held that the plaintiffs were entitled to seek premium pay under Labor Code section 226.7 for any failure by the hospital to provide mandatory second meal periods before the decision that falls within the governing three-year statutory period. The Court noted, "there is no compelling reason of fairness or public policy that warrants an exception to the general rule of retroactivity for our decision partially invalidating section 11(D)."

The California Supreme Court granted review on May 20, 2015. The Court stated the issues on review as follows:

1. Is the health care industry meal period waiver provision in section 11(D) of Industrial Welfare Commission Order No. 5-2001 invalid under Labor Code section 512, subdivision (a)?

2. Should the decision of the Court of Appeal partially invalidating the Wage Order be applied retroactively?

ARGUMENTS IN SUPPORT

The California Hospital Association supports this measure, stating:

"This bill will clarify that employees in the healthcare industry can continue to waive one of their two meal periods pursuant to Wage Orders 4 and 5-2001, even when their shift exceeds 12 hours. A recent court ruling, Gerard v. Orange Coast Memorial Medical Center, could jeopardize this option, thus jeopardizing the availability to 12-hour shifts. Absent clarification that Wage Orders 4 and 5, section 11(D) has been valid since it was adopted by the Industrial Welfare Commission in June 2000, hospitals will be liable for a missed meal period premium on any day an employee worked even 1 minute over the 12-hour mark. This could result in millions of dollars in liability, as well as scheduling changes throughout the hospital industry…

…While the California Supreme Court recently accepted review of the Gerard case, it nonetheless poses a significant adverse impact on healthcare employers and employees, particularly those working 12-hour shifts who want to waive one of their meal periods so that they do not have to prolong their workday by 30 minutes. Because it is unclear when and how the Supreme Court will resolve the case, hospitals are faced with the decision whether to immediately and significantly change their scheduling practices, which may include extending the shift to 13 hours to accommodate a second, off-duty meal period, reverting to 8-hour shifts or taking some other action to minimize potential liability moving forward. Further, while the Gerard appellate decision has been de-published similar cases have already been filed and thus without clarification of the law, hospitals currently risk facing expensive class action litigation and potential retroactive liability in the millions of dollars. As the Supreme Court evaluates the legal issues raised in the Gerard case, clarification of the law by the legislature is extremely important to the Court’s analysis. Thus, it is critically important for the Legislature to reject the Court of Appeal decision and the rationale on which it is based."

With respect to the legislative history of the IWC Wage Orders and the applicable statute, the California Hospital Association states:

"Since 1993, healthcare employers have been able to offer a meal period waiver that allows employees working 12-hour shifts to voluntarily waive one of their two meal periods. 12-hour shifts are common in the healthcare industry, both in unionized and non-unionized environments. Employees who work 12-hour shifts may frequently work a few minutes more than 12 hours due to clocking in a couple of minutes early or clocking out a couple of minutes late.

In 1999, as part of AB 60, the California Legislature codified the meal period rules which had formerly only been included in the wage order.  In Labor Code section 512, the Legislature expressly required that employees working more than 10 hours be provided a second meal period and also expressly provided that employees could voluntarily waive the second meal period so long as they did not work more than 12 hours.

At the same time, the Legislature specifically gave the Industrial Welfare Commission (IWC) authority to determine whether to continue to authorize 12-hour alternative workweek schedules, in Labor Code 517. In Labor Code 516, the Legislature also expressly authorized the IWC to adopt or amend the wage orders with respect to meal periods, notwithstanding the rules set forth in Labor Code 512.

After several hearings on the matter and significant negotiation between labor and hospital representatives, the IWC decided to maintain 12-hour shifts, with some variation, and to maintain the special healthcare meal period waiver rules, allowing employees in the healthcare industry to waive one of their meal periods even when a shift exceeded 12 hours. 

This action was taken on June 30, 2000 — the deadline set by the Legislature for the IWC to determine whether to continue 12-hour shifts. These amendments went into effect on October 1, 2000.  The time between the adoption date of June 30 and the effective date of October 1 was needed to accomplish administrative activity, such as updating the wage orders.

On September 16, 2000, the Governor signed urgency legislation, SB 88. That bill limited the IWC's authority to establish meal period rules that conflicted with Labor Code section 512.  That law went into effect more than two months after the IWC adopted Wage Order 5 and 14 other wage orders.

There is no evidence to suggest that SB 88 was intended to invalidate the action the IWC took on June 30, 2000 with respect to the healthcare meal period rules. In order to preserve the status quo preferred by both hospitals and their employees for over 20 years, as confirmed by the IWC in 2000, a legislative clarification is necessary."

The United Nurses Association of California/Union of Health Care Professionals (UNAC), supports this measure, stating:

"Under this wage order provision, UNAC members have for years enjoyed the flexibility of alternate work schedules, which allows for greater staffing flexibility and better patient care. Patient outcomes are dramatically improved in environments where the nurses and other health care professionals can place priority on the needs of their patients without interruption by an arbitrary meal period when the shift runs long. (RNs are generally able to eat during work time in break rooms.) In addition, allowing health care workers the option of working longer shifts enables them to take extra days off during the work week, which in turn ensures that they are fully rested when they return to work to provide better patient care. Moreover, hospitals have enjoyed the ability to have fewer shift changeovers.

However, in a recent decision, the appellate court declared Section 11(D) invalid because it authorized second meal waivers for shifts longer than 12 hours. This decision completely upends well-established staffing schedules and will result in a severe disruption of the lives of our members, many of whom have built a schedule of work, child care, and other obligations around the ability to waive a second meal period."

Similarly, the Service Employees International Union, United Healthcare Workers West (SEIU-UHW) supports this bill, stating:

"Twelve hour shifts are overwhelming preferred by healthcare workers because they work a shorter work week (3 days on, 4 days off). They spend less time commuting and more time with family and friends. The enhanced work-life balance increases job satisfaction and less burn-out. This is the benefit that nurses cite most often in surveys about their shift preferences. Having four full days away from the job can allow you to enjoy your personal life to a greater extent or spend more time with family. Hospitals find that this in turn translates into better staff morale, less staff turnover, and reduced absenteeism…Rather than risk overturning 22 years of settled regulation we are asking for a legislative solution that would simply codify the existing regulation into law."

REGISTERED SUPPORT / OPPOSITION:

Support

Adventist Health

AFSCME

Anaheim Regional Medical Center

Arroyo Grande Community Hospital

Bakersfield Memorial Hospital

Beverly Hospital

California Children's Hospital Association

California Hospital Association

California Hospital Medical Center, Los Angeles

California Retailers Association

Cedars-Sinai Medical Center

Citrus Valley Health Partners

Community Hospital of San Bernardino

Community Medical Centers

Corona Regional Medical Center

Delano Regional Medical Center

Dignity Health

Dominican Hospital, Santa Cruz

French Hospital Medical Center, San Luis Obispo

Glendale Memorial Hospital & Health Center, Glendale

Glenn Medical Center

Good Samaritan Hospital

Hospital Corporation of America

Keck Hospital of USC

Loma Linda University Health

Lompoc Valley Medical Center

Long Beach and Community Hospital Long Beach

Long Beach Memorial

Madera Community Hospital

Marian Region Medical Center, Santa Maria/West Santa Maria

Marina Del Rey Hospital

Mark Twain St. Joseph's Hospital, San Andreas

MemorialCare Health System

Mercy General, Sacramento

Mercy Hospital, Folsom/Bakersfield

Mercy Medical Center, Merced/Mt. Shasta/Redding

Mercy San Juan Medical Center, Carmichael

Mercy Southwest Hospital, Bakersfield

Methodist Hospital of Sacramento

Miller Children's and Women's Hospital

Northridge Hospital Medical Center

Orange Coast Memorial Medical Center

Palomar Health

Physicians for Healthy Hospitals

Providence Health & Services

Saddleback Memorial Medical Center

Saint Agnes Medical Center

Saint Francis Memorial Hospital, San Francisco

San Gorgonio Memorial Hospital

SEIU United Healthcare Workers West

Sequoia Hospital, Redwood City

Seton Medical Center

Sharp HealthCare

Sierra Nevada Memorial Hospital, Grass Valley

St. Bernardine Medical Center, San Bernardino

St. Elizabeth Community Hospital, Red Bluff

St. John's Pleasant Valley Hospital, Camarillo

St. John's Regional Medical Center, Oxnard

St. Joseph's Behavioral Health Center, Stockton

St. Joseph's Health, Orange

St. Joseph's Medical Center, Stockton

St. Mary's Medical Center, Long Beach/ San Francisco

Stanford Health Care

Sutter Health

United Nurses Association of California/Union of Health Care Professionals (Sponsor)

USC Norris Cancer Hospital

USC Verdugo Hills Hospital

Woodland Healthcare, Woodland

Opposition

None on file.

Analysis Prepared by: Ben Ebbink / L. & E. / (916) 319-2091

SENATE THIRD READING

STR Bill Id:SB 327

Author:(Hall)

As Amended Ver:April 22, 2015

Majority vote

SENATE VOTE: 35-0

SUMMARY: Consolidates two similar tied-house exceptions (one pertaining to "on-sale" retailers and the other to "off-sale" retailers) within the Alcoholic Beverage Control Act (Act), which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers. Specifically, this bill:

1. Deletes an existing tied-house exception pertaining to the listing of "off-sale" licensed retailers as a thing of value or prohibited inducement and instead includes "off-sale" retailers within the exception previously applicable only to "on-sale" licensed retailers.

2. Makes other minor conforming changes.

EXISTING LAW:

1. Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this state and the collection of license fees for this purpose.

2. Separates the alcoholic beverage industry into three component parts, or tiers, of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). (Referred to as the "tied-house" law or "three-tier" system.) The original policy rationale for this body of law was to: a) promote the state’s interest in an orderly market; b) prohibit the vertical integration and dominance by a single producer in the market place; c) prohibit commercial bribery and to protect the public from predatory marketing practices; and, d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the "three-tier" system.

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.

4. Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of two or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met.

5. Includes similar provisions applicable to "on-sale" licensed premises, except that those provisions also extend the exception described in item 4) above to others forms of "electronic" media.

6. Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine, and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

Purpose of this bill. The author's office states that under existing law a response to a direct inquiry from a consumer received by telephone, by mail, by electronic Internet inquiry, or in person does not constitute a thing of value or prohibited inducement to the listed on-sale or off-sale retailer. This bill is simply intended to recast existing ABC statutes by consolidating into a single statute the "on-sale" and "off-sale" tied-house exceptions pertaining to direct inquiries.

Prior legislation. AB 2349 (Nestande), Chapter 374, Statutes of 2012. Provided that the listing of names, addresses, telephone numbers, or email addresses in other forms of electronic media do not constitute a thing of value. Also, revised the direct inquiry provisions to remove the requirement that the unaffiliated on-sale retailer operate and be licensed as a bona fide public eating-place.

SB 1096 (Wiggins), Chapter 285, Statutes of 2010. Among other things, revised the direct inquiry provisions in the ABC Act pertaining to the authority of producers, wholesalers and importers to respond to consumer inquiries as to where their products may be found to include any "electronic" inquiries from consumers.

SB 1423 (Chesbro), Chapter 205, Statutes of 2000. Authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products.

SB 1233 (Chesbro), Chapter 666, Statutes of 1999. Allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0002040

Date of Hearing: July 15, 2015

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

SBPCA Bill Id:SB 327

Author:(Hall) – As Amended Ver:April 22, 2015

SENATE VOTE: 35-0

SUBJECT: Alcoholic beverages: licensees: tied-house restrictions.

SUMMARY: Consolidates two similar tied-house exceptions (one pertaining to “on-sale” retailers and the other to “off-sale” retailers) within the Alcoholic Beverage Control Act (Act), which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers. Specifically, this bill:

1) Deletes an existing tied-house exception pertaining to the listing of “off-sale” licensed retailers as a thing of value or prohibited inducement and instead includes “off-sale” retailers within the exception previously applicable only to “on-sale” licensed retailers.

2) Makes other minor conforming changes.

EXISTING LAW:

1) Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this state and the collection of license fees for this purpose.

2) Separates the alcoholic beverage industry into three component parts, or tiers, of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). (Referred to as the “tied-house” law or “three-tier” system.) The original policy rationale for this body of law was to: (a) promote the state’s interest in an orderly market; (b) prohibit the vertical integration and dominance by a single producer in the market place; (c) prohibit commercial bribery and to protect the public from predatory marketing practices; and, (d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the “three-tier” system.

3) Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.

4) Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of two or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met.

5) Includes similar provisions applicable to “on-sale” licensed premises, except that those provisions also extend the exception described in item #4 above to others forms of “electronic” media.

6) Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine, and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill. The author’s office states that under existing law a response to a direct inquiry from a consumer received by telephone, by mail, by electronic Internet inquiry, or in person does not constitute a thing of value or prohibited inducement to the listed on-sale or off-sale retailer. This bill is simply intended to recast existing ABC statutes by consolidating into a single statute the “on-sale” and “off-sale” tied-house exceptions pertaining to direct inquiries.

Prior legislation. AB 2349 (Nestande), Chapter 374, Statutes of 2012. Provided that the listing of names, addresses, telephone numbers, or email addresses in other forms of electronic media do not constitute a thing of value. Also, revised the direct inquiry provisions to remove the requirement that the unaffiliated on-sale retailer operate and be licensed as a bona fide public eating-place.

SB 1096 (Wiggins), Chapter 285, Statutes of 2010. Among other things, revised the direct inquiry provisions in the ABC Act pertaining to the authority of producers, wholesalers and importers to respond to consumer inquiries as to where their products may be found to include any “electronic” inquiries from consumers.

SB 1423 (Chesbro), Chapter 205, Statutes of 2000. Authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products.

SB 1233 (Chesbro), Chapter 666, Statutes of 1999. Allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages.

REGISTERED SUPPORT / OPPOSITION:

Support

California Beer & Beverage Distributors

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531

 CONSENT  

Bill No: SB 327

Author: Hall (D)

Amended: 4/22/15

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 7-0, 4/28/15

AYES: Hall, Block, Hernandez, Hill, Hueso, Lara, McGuire

NO VOTE RECORDED: Berryhill, Gaines, Galgiani, Vidak

SUBJECT: Alcoholic beverages: licensees: tied-house restrictions

SOURCE: Author

DIGEST: This bill consolidates two similar tied-house exceptions (one pertaining to “on-sale” retailers and the other to “off-sale” retailers) within the Alcoholic Beverage Control (ABC) Act, which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this state and the collection of license fees for this purpose.
   
   

2. Separates the alcoholic beverage industry into three component parts, or tiers, of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). (Referred to as the “tied-house” law or “three-tier” system.) The original policy rationale for this body of law was to: (a) promote the state’s interest in an orderly market; (b) prohibit the vertical integration and dominance by a single producer in the market place; (c) prohibit commercial bribery and to protect the public from predatory marketing practices; and, (d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the “three-tier” system.
   
   

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.
   
   

4. Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of two or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met.
   
   

5. Includes similar provisions applicable to “on-sale” licensed premises, except that those provisions also extend the exception described in item #4 above to others forms of “electronic” media.

6. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine, and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Deletes an existing tied-house exception pertaining to the listing of “off-sale” licensed retailers as a thing of value or prohibited inducement and instead includes “off-sale” retailers within the exception previously applicable only to “on-sale” licensed retailers.
   
   

2. Makes other minor conforming changes.

Background

Tied-house. Tied-house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products. Existing tied-house laws generally prohibit a manufacturer, importer or wholesaler from furnishing, giving, or lending any money or other thing of value to any person engaged in operating, owning, or maintaining any off-sale or on-sale licensed retail premise. Existing law also provides two separate tied-house exceptions (one pertaining to “on-sale” retailers and the other to “off-sale” retailers) relative to the listing of a licensed retailer as a thing of value or prohibited inducement.

Purpose of SB 327. The author’s office states that under existing law a response to a direct inquiry from a consumer received by telephone, by mail, by electronic Internet inquiry, or in person does not constitute a thing of value or prohibited inducement to the listed on-sale or off-sale retailer.  This bill is simply intended to recast existing ABC statutes by consolidating into a single statute the “on-sale” and “off-sale” tied-house exceptions pertaining to direct inquiries.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 4/28/15)

California Beer & Beverage Distributors

OPPOSITION: (Verified 4/28/15)

None received

Prepared by: Arthur Terzakis / G.O. / (916) 651-1530

5/1/15 14:33:49

**** END ****

 CONSENT  

Bill No: SB 327

Author: Hall (D)

Amended: 4/22/15

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 7-0, 4/28/15

AYES: Hall, Block, Hernandez, Hill, Hueso, Lara, McGuire

NO VOTE RECORDED: Berryhill, Gaines, Galgiani, Vidak

SUBJECT: Alcoholic beverages: licensees: tied-house restrictions

SOURCE: Author

DIGEST: This bill consolidates two similar tied-house exceptions (one pertaining to “on-sale” retailers and the other to “off-sale” retailers) within the Alcoholic Beverage Control (ABC) Act, which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this state and the collection of license fees for this purpose.
   
   

2. Separates the alcoholic beverage industry into three component parts, or tiers, of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). (Referred to as the “tied-house” law or “three-tier” system.) The original policy rationale for this body of law was to: (a) promote the state’s interest in an orderly market; (b) prohibit the vertical integration and dominance by a single producer in the market place; (c) prohibit commercial bribery and to protect the public from predatory marketing practices; and, (d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the “three-tier” system.
   
   

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.
   
   

4. Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of two or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met.
   
   

5. Includes similar provisions applicable to “on-sale” licensed premises, except that those provisions also extend the exception described in item #4 above to others forms of “electronic” media.

6. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine, and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Deletes an existing tied-house exception pertaining to the listing of “off-sale” licensed retailers as a thing of value or prohibited inducement and instead includes “off-sale” retailers within the exception previously applicable only to “on-sale” licensed retailers.
   
   

2. Makes other minor conforming changes.

Background

Tied-house. Tied-house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products. Existing tied-house laws generally prohibit a manufacturer, importer or wholesaler from furnishing, giving, or lending any money or other thing of value to any person engaged in operating, owning, or maintaining any off-sale or on-sale licensed retail premise. Existing law also provides two separate tied-house exceptions (one pertaining to “on-sale” retailers and the other to “off-sale” retailers) relative to the listing of a licensed retailer as a thing of value or prohibited inducement.

Purpose of SB 327. The author’s office states that under existing law a response to a direct inquiry from a consumer received by telephone, by mail, by electronic Internet inquiry, or in person does not constitute a thing of value or prohibited inducement to the listed on-sale or off-sale retailer.  This bill is simply intended to recast existing ABC statutes by consolidating into a single statute the “on-sale” and “off-sale” tied-house exceptions pertaining to direct inquiries.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT:

(Verified 4/28/15)

California Beer & Beverage Distributors

OPPOSITION: (Verified 4/28/15)

None received

Prepared by: Arthur Terzakis / G.O. / (916) 651-1530

4/29/15 16:13:05

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: SB 327 Hearing Date: 4/28/2015

SUBJECT: Alcoholic beverages: licensees: tied-house restrictions.

DIGEST: This bill consolidates two similar tied-house exceptions (one pertaining to “on-sale” retailers and the other to “off-sale” retailers) within the Alcoholic Beverage Control (ABC) Act, which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers.

ANALYSIS:

Existing law:

1. Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state and the collection of license fees for this purpose.
   
   

2. (Referred to as the “tied-house” law or “three-tier” system), separates the alcoholic beverage industry into three component parts, or tiers, of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). The original policy rationale for this body of law was to: (a) promote the state’s interest in an orderly market; (b) prohibit the vertical integration and dominance by a single producer in the market place; (c) prohibit commercial bribery and to protect the public from predatory marketing practices; and, (d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the “three-tier” system.
   
   

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.
   
   

4. Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of 2 or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met.
   
   

5. Includes similar provisions applicable to “on-sale” licensed premises, except that those provisions also extend the exception described in item #4 above to others forms of “electronic” media.

6. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An “off-sale” license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Deletes an existing tied-house exception pertaining to the listing of “off-sale” licensed retailers as a thing of value or prohibited inducement and instead includes “off-sale” retailers within the exception previously applicable only to “on-sale” licensed retailers.
   
   

2. Makes other minor conforming changes.

Background

Tied-house: Tied-house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products. Existing tied-house laws generally prohibit a manufacturer, importer or wholesaler from furnishing, giving, or lending any money or other thing of value to any person engaged in operating, owning, or maintaining any off-sale or on-sale licensed retail premise. Existing law also provides two separate tied-house exceptions (one pertaining to “on-sale” retailers and the other to “off-sale” retailers) relative to the listing of a licensed retailer as a thing of value or prohibited inducement.

Purpose of SB 327: The author’s office states that under existing law a response to a direct inquiry from a consumer received by telephone, by mail, by electronic Internet inquiry or in person does not constitute a thing of value or prohibited inducement to the listed on-sale or off-sale retailer.  This measure is simply intended to recast existing ABC statutes by consolidating into a single statute the “on-sale” and “off-sale” tied-house exceptions pertaining to direct inquiries.

Prior/Related Legislation

AB 2349 (Nestande), Chapter 374, Statutes of 2012. Provided that the listing of names, addresses, telephone numbers, or email addresses in other forms of electronic media do not constitute a thing of value. Also, revised the direct inquiry provisions to remove the requirement that the unaffiliated on-sale retailer operate and be licensed as a bona fide public eating place.

SB 1096 (Wiggins), Chapter 285, Statutes of 2010. Among other things, revised the direct inquiry provisions in the ABC Act pertaining to the authority of producers, wholesalers and importers to respond to consumer inquiries as to where their products may be found to include any “electronic” inquiries from consumers.

SB 1423 (Chesbro), Chapter 205, Statutes of 2000. Authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products.

SB 1233 (Chesbro), Chapter 666, Statutes of 1999. Allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT:

California Beer & Beverage Distributors

OPPOSITION:

None received