Existing law requires that employers pay wages to their employees, twice per calendar month, on days designated in advance as regular paydays. However, employees defined as executive, administrative, or professional may be paid once per month. Existing law provides that a violation of this provision is a misdemeanor.

This bill would apply these provisions to the payment of wages of require that employees of the Regents of the University of California, as specified. California be paid on a regular payday. The bill would require those university employees who are paid on a monthly basis to be paid no later than 5 days after the close of the monthly payroll period and would also provide that those employees who are paid on a more frequent basis be paid in accordance with the pay policies announced in advance by the university.

By expanding the definition of a crime, this bill would impose a state-mandated local program.

The bill would provide legislative findings and declarations in support of these provisions.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

SENATE THIRD READING

STR Bill Id:SB 698

Author:(Leyva)

As Amended Ver:May 17, 2019

Majority vote

SUMMARY:

Provides that all wages earned by employees of the University of California (UC) must be paid on a regular payday.

Major Provisions

1. Makes findings and declarations regarding the impact of the UC's failure to pay wages to its employees on time and on regular paydays.
2. Provides that, notwithstanding an exemption for employees directly employed by the State of California, all wages earned by UC employees must be paid on a regular payday.
3. Provides that employees on a monthly payment schedule shall be paid no later than five days after the close of the monthly payroll period.
4. Specifies that for employees on a more frequent payment schedule, payment is due according to the pay schedule announced by the UC in advance. 
5. States that nothing in the above provisions shall be construed to prohibit the UC Regents (Regents) from allowing its employees to choose to distribute their pay so that they will receive paychecks throughout the year, rather than during pay periods worked only.

COMMENTS:

In 2011, in an effort to streamline and simplify its payroll system, the UC created a new system known as UCPath. The system has been phased in over time and was expanded to cover the entire University of California, Los Angeles, campus in 2018. According to proponents of this bill, UCPath came in significantly over budget and during its implementation created countless pay and benefit errors for university employees, including student workers. Employees who were paid late or not at all were left with little recourse as the UC is exempt from California's wage provisions and therefore, the reach of the LC's enforcement authority.

According to the Author:

"Beginning in September 2018, hundreds of student workers were paid late, paid the wrong amount, or not paid at all for months of work. This delay in wages was the result of the disastrous implementation of the UCPath payroll system, and it exposed the lack of statutory protections for workers at UC against wage theft. In addition to the effect that UCPath had on student employees, other workers at UC, including clerical and skilled trades workers, were also affected. Many of these workers are still seeking remedies for absent or missing pay from the UC.

Section 204 of the Labor Code guarantees workers in the private sector the right to be paid on time, and, in doing so, California law recognizes late or missing paychecks as a form of wage theft. However, under Section 220 of the Labor Code, UC is exempt from the rules that govern employers in the private sector. This exemption has created a lack of accountability for timely pay at UC, which has exacerbated the problems that student workers and other workers are currently facing.

At the University of California, student workers are low-wage workers who face serious hardship when their employers violate these rules. The average student worker is paid $21,000 a year and, as a result of UCPath, some workers were directed to food pantries while administrators failed to pay their wages."

Arguments in Support:

The United Auto Workers, Local 2865, a bill sponsor, states in support, "Section 204 of the Labor Code guarantees workers in the private sector the right to be paid on time, and

in doing so, California law recognizes late or missing paychecks as a form of wage theft. The Labor Commissioner adjudicates charges of wage theft, and wages and damages are awarded to workers following a favorable decision. An employer who denies its employees their right to timely payment and adequate breaks is also subject to damages and civil penalties, which, if applied, go into the General Fund. However, under Section 220 of the Labor Code, UC is exempt from the rules that govern employers in the private sector. This exemption has created a lack of accountability for tim ely pay at UC, which has exacerbated the problems that ASEs and other workers are currently facing. At the University of California, Academic Student Employees are low-wage workers who face serious hardships when their employer does not pay them on time. Fellow UC-workers, including clerical and skilled-trades workers, face similar hardships, and they too do not have recourse to the State's wage and hour protections."

Arguments in Opposition:

None on file.

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, significant costs, possibly in the millions of dollars, as a result of new penalties on the UC. Exact costs are unknown, but it can assumed that ongoing payroll issues affecting UC will continue in the short term, and these issues will result in errors or delayed payments and penalty charges in the millions of dollars. Moreover, UC will need to devote resources and staff to respond to these charges through the administrative process.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM LABOR AND EMPLOYMENT: 7-0-0

YES: Kalra, Flora, Carrillo, Diep, Gonzalez, Jones-Sawyer, Luz Rivas

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

UPDATED:

VERSION: May 17, 2019

CONSULTANT: Megan Lane / L. & E. / (916) 319-2091 FN: 0001777

Date of Hearing: August 14, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 698

Author:(Leyva) – As Amended Ver:May 17, 2019

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill provides that all wages earned by employees of the University of California (UC) must be paid on a regular payday.

FISCAL EFFECT:

Significant costs, possibly in the millions of dollars, as a result of new penalties on the UC. Exact costs are unknown, but it can assumed that ongoing payroll issues affecting UC will continue in the short term, and these issues will result in errors or delayed payments and penalty charges in the millions of dollars. Moreover, UC will need to devote resources and staff to respond to these charges through the administrative process.

COMMENTS:

Background and purpose. Existing law requires employers to pay workers on time, and late paychecks can be considered a form of wage theft. The Labor Commissioner (LC) adjudicates charges of wage theft, and wages and damages are awarded to workers for a successful decision. However, UC is exempt from these rules.

Beginning in September 2018, certain low-wage workers at UC performed their work without receiving a paycheck. In some instances, UC clerical and skilled trades workers waited over a month for their paychecks. The delay in wage payment was the result of UC’s implementation of a new payroll system, UCPath.

According to the author, SB 698 will provide statutory protection for UC workers against wage theft. This bill applies existing laws around timely wage payments (specifically, Labor Code Section 204) to UC.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: June 26, 2019

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Ash Kalra, Chair

SBPCA Bill Id:SB 698

Author:(Leyva) – As Amended Ver:May 17, 2019

SENATE VOTE: 38-0

SUBJECT: Employee wages: payment

SUMMARY: Provides that all wages earned by employees of the University of California (UC) must be paid on a regular payday. Specifically, this bill:

1. Makes findings and declarations regarding the impact of the UC’s failure to pay wages to its employees on time and on regular paydays.
2. Provides that, notwithstanding an exemption for employees directly employed by the State of California, all wages earned by UC employees must be paid on a regular payday.
3. Provides that employees on a monthly payment schedule shall be paid no later than five days after the close of the monthly payroll period.
4. Specifies that for employees on a more frequent payment schedule, payment is due according to the pay schedule announced by the UC in advance. 
5. States that nothing in the above provisions shall be construed to prohibit the UC Regents (Regents) from allowing its employees to choose to distribute their pay so that they will receive paychecks throughout the year, rather than during pay periods worked only.

EXISTING LAW:

Constitutional Provisions

1. Establishes the UC as a public trust under the administration of the Regents.
2. Grants to the Regents all the powers necessary or convenient for the effective administration of this public trust.
3. Provides that the Regents are subject only to such legislative control as may be necessary to insure the security of its funds and compliance with the terms of the endowments of the university and such competitive bidding procedures as may be made applicable to the university by statute for the letting of construction contracts, sales of real property, and purchasing of materials, goods, and services.

Labor Code Provisions

1. Establishes the Labor Commissioner’s Office (LC) within the Department of Industrial Relations (DIR) to investigate and enforce labor laws including the timely payment of wages to employees.
2. Prescribes the manner and frequency by which employers must pay employees for wages earned.
3. Provides for a civil penalty, in addition to, and entirely independent and apart from other penalties, for a failure to provide the timely payment of wages, and requires the LC to recover that penalty.
4. Exempts employees directly employed by the State of California from provisions related to the payment of wages including the general requirement that employers pay employees earned wages twice during each calendar month, on days designated in advance by the employer as the regular paydays.

FISCAL EFFECT: According to the Senate Appropriations Committee, the UC has yet to determine the costs of this version of the bill; however, costs would likely be, at most, in the hundreds of thousands of dollars annually to implement the provisions of the amended version of the bill (General Fund). The DIR would incur minor and absorbable costs.

COMMENTS: In 2011, in an effort to streamline and simplify its payroll system, the UC created a new system known as UCPath. The system has been phased in over time and was expanded to cover the entire UCLA campus in 2018. According to proponents of this bill, UCPath came in significantly over budget and during its implementation created countless pay and benefit errors for university employees, including student workers. Employees who were paid late or not at all were left with little recourse as the UC is exempt from California’s wage provisions and therefore, the reach of the LC’s enforcement authority.

According to the author, “Beginning in September 2018, hundreds of student workers were paid late, paid the wrong amount, or not paid at all for months of work. This delay in wages was the result of the disastrous implementation of the UCPath payroll system, and it exposed the lack of statutory protections for workers at UC against wage theft. In addition to the effect that UCPath had on student employees, other workers at UC, including clerical and skilled trades workers, were also affected. Many of these workers are still seeking remedies for absent or missing pay from the UC.

Section 204 of the Labor Code guarantees workers in the private sector the right to be paid on time, and, in doing so, California law recognizes late or missing paychecks as a form of wage theft. However, under Section 220 of the Labor Code, UC is exempt from the rules that govern employers in the private sector. This exemption has created a lack of accountability for timely pay at UC, which has exacerbated the problems that student workers and other workers are currently facing.

At the University of California, student workers are low-wage workers who face serious hardship when their employers violate these rules. The average student worker is paid $21,000 a year and, as a result of UCPath, some workers were directed to food pantries while administrators failed to pay their wages.”

The United Auto Workers, Local 2865, a bill sponsor, states in support, “Section 204 of the Labor Code guarantees workers in the private sector the right to be paid on time, and

in doing so, California law recognizes late or missing paychecks as a form of wage theft. The Labor Commissioner adjudicates charges of wage theft, and wages and damages are awarded to workers following a favorable decision. An employer who denies its employees their right to timely payment and adequate breaks is also subject to damages and civil penalties, which, if applied, go into the General Fund. However, under Section 220 of the Labor Code, UC is exempt from the rules that govern employers in the private sector. This exemption has created a lack of accountability for timely pay at UC, which has exacerbated the problems that ASEs and other workers are currently facing. At the University of California, Academic Student Employees are low-wage workers who face serious hardships when their employer does not pay them on time. Fellow UC-workers, including clerical and skilled-trades workers, face similar hardships, and they too do not have recourse to the State’s wage and hour protections.”

Related and Prior Legislation

AB 673 (Carrillo) of 2019 would provide that penalties for late payment of wages shall be recovered by the LC as civil penalties, payable to the affected employee, or by the employee as statutory penalties in a hearing pursuant to the LC’s authority under the Labor Code. The affected employee may also enforce civil penalties for late payment of wages through the Private Attorneys General Act (PAGA) but cannot also recover statutory penalties for the same violation. The measure is pending in the Senate Labor, Public Employment and Retirement Committee.

SB 341 (Morrell) of 2019 would have provided, among other things that the State of California’s pay directly employed employees twice-per-month, on days designated in advance by the employer as regular paydays. The measure failed passage in the Senate Labor, Public Employment and Retirement Committee.

SB 1234 (Vidak) of 2018 would have applied the requirement that employees are paid twice-per-month to employees directly employed by the State of California. The measure failed passage in the Senate Committee on Public Employment and Retirement.

REGISTERED SUPPORT / OPPOSITION:

Support

California Teamsters Public Affairs Council (Co-Sponsor)
UAW Local 2865 (Co-Sponsor)
American Federation Of State, County And Municipal Employees Local 3299
California Employment Lawyers Association
California Labor Federation
California Nurses Association
California School Employees Association
California State Council of Service Employees
UAW Local 5810
University Council-American Federation of Teachers
University of California Student Association
University Professional & Technical Employees-CWA Local 9119

Opposition

None on file.

Analysis Prepared by: Megan Lane / L. & E. /

 THIRD READING  

Bill No: SB 698

Author: Leyva (D), et al.

Amended: 5/17/19

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 4/24/19

AYES: Hill, Morrell, Jackson, Mitchell, Pan

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SUBJECT: Employee wages: payment

SOURCE: California Teamsters Public Affairs Council

DIGEST:

This bill requires the University of California to pay their employees on a regular payday, as specified.

ANALYSIS:

Existing law:

1. Establishes the University of California (UC) as a public trust, administered by the Board of Regents with full powers of organization and government, subject only to such legislative control as may be necessary to insure the security of its funds and compliance with the terms of the endowments of the university and such competitive bidding procedures as may be made applicable to the university by statute for the letting of construction contracts, sales of real property, and purchasing of materials, goods, and services. (Constitution of California, Article IX, Section 9).
2. Preserves legislative authority to regulate UC in three additional areas:
   1. The power of appropriation, preventing the Regents from compelling appropriations for salaries;
   2. General police power regulations governing private persons and corporations; and
   3. Legislation regulating public agency activity not generally applicable to the public when the legislation regulates matters of statewide concern not involving internal university affairs.

(San Francisco Labor Council v. Regents of University of California (1980) 26 Cal. 3d 785).

1. Requires the Labor Commissioner who heads the Division of Labor Standards Enforcement to investigate and enforce statutes and wage orders of the Industrial Welfare Commission that specify the requirements for the payment of wages by employers. Existing law provides for criminal and civil penalties for violations of statutes and orders of the commission regarding payment of wages (Labor Code Section 21, 79 et seq.).
2. Requires employers to comply with various Labor Code statutes regulating when and how employer pay employees (LC Section 200 et seq.)
3. Exempts public employers from certain Labor Code provisions related to the payment of wages including a provision that requires employers generally to pay employees earned wages twice during each calendar month, on days designated in advance by the employer as the regular paydays (LC 204, LC 220)
4. Establishes the Higher Education Employer-Employee Relations Act (HEERA) to provide a system of collective bargaining between public institutions of higher education and their employees (GC 3560 et seq.).

This bill:

1. Specifies that, notwithstanding an exemption for public employers, all wages earned by UC employees must be paid on a regular payday.
2. Requires that, for employees paid on a monthly basis, payment is due no later than five days after the close of monthly payroll.
3. Requires that, for employees paid on a more frequent schedule, payment is due according to the pay schedule announced by the UC system in advance.
4. Makes findings and declarations on the purpose of this bill, as well as the non-alteration of existing UC pay schedules.

Comments

Need for this bill? According to this bill’s proponents, UC is implementing a new payroll system (UCPath) meant to simplify and standardize payroll procedures system wide. UC started to plan for UCPath in 2011 and began a phased deployment of the system approximately three years ago. Currently, UC has integrated payroll for approximately 77,000 of UC’s 230,000 employees into UCPath with the remainder expected to be included in the system by the end of 2020. However, implementation has resulted in several payroll errors, delayed and missed payments to employees, improper cancellation of health insurance and other benefits, and failure to deduct social security taxes. The payroll discrepancies have affected thousands of employees and especially created difficulties for lower wage university employees and student employees who may live paycheck to paycheck.

According to a February 25, 2019, Joint UC-United Automobile Workers (UAW) statement regarding payroll issues for academic student employees, “The fall 2018 implementation of UCPath, UC’s new system wide payroll system, resulted in paycheck inaccuracies for hundreds of academic student employees on several UC campuses.”

This bill’s supporters believe that making UC subject to Labor Code provisions requiring timely payment of wages and providing fines and penalties for violations thereof will create pressure to ensure UC puts forward the necessary attention and resources to ensure UC pays university employees earned wages in a timely fashion. Toward this end, they seek to strip UC of the Labor Code exemption for public employers from certain relevant wage payment protections in the Labor Code.

UC Constitutional Autonomy and Potential Costs to UC

Although this bill seeks to specifically apply certain Labor Code wage payment requirements to UC, UC may still be exempt from the Labor Code requirements under its broad grant of autonomy under the California Constitution. Generally, courts have held that UC is exempt from state Legislative mandates that seek to regulate its internal affairs and have found UC policies toward its employees within the ambit of UC’s internal affairs. On the other hand, courts have held that the Legislature may intrude upon UC’s autonomy where the Legislature is regulating a matter that implicates statewide concerns unless the matter is exclusively internal to the university. Whether the Legislature’s policy of protecting employees from wage theft sufficiently meets the judicial construct of a matter of statewide concern and thus pierces UC’s constitutional autonomy is likely a matter for further litigation. If such litigation ends unfavorably for UC, UC would likely face substantial costs from fines and penalties associated with violations of the relevant Labor Code protections if UC is unable to address the payroll problems associated with UCPath implementation. Nevertheless, it is reasonable for the Legislature to balance the possibility of UC’s self-inflicted costs with the importance of protecting low wage employees from continuous cycles of delayed payment of earned wages and the concomitant harm therefrom.

HEERA and Collective Bargaining

HEERA generally provides for a system of labor relations between UC and its represented employees. MOUs between the relevant parties generally address issues such as compensation including pay dates and procedures to address violations of the collective bargaining agreement. Thus, the possibility exists that disputes over payroll should be resolved through bargaining.

It appears from a cursory review of current contracts between UC and the sponsors that no provisions address payroll errors. Senate Labor, Public Employment and Retirement Committee staff understands from this bill’s proponents that UC’s past practice has been to fix payroll errors within 48 hours but that UC has never agreed to bargain over payroll errors and associated remedies. Nevertheless, UC has reached agreements with some employee representatives for affected employees who have filed grievances pursuant to the contract. The aforementioned February 25, 2019, Joint UC-UAW statement also notes that the parties agreed to a resolution that “each affected academic student employee will receive $150 (net after taxes); and employees with paycheck issues of more than one month will receive additional compensation, as appropriate, up to a maximum of $450. These payments are in addition to restitution of any and all wages under the UAW 2865 contract.”

Despite the UC-UAW agreement, it is doubtful that the Legislature ever intended to require Higher Education employees to bargain with UC over ensuring that their paychecks were accurate and timely paid for earned wages, especially considering the Legislature’s general statewide policy imperative that employees should receive their wages when earned.

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

According to the Senate Appropriations Committee, UC has yet to determine the costs of this version of the bill; however, costs would likely be, at most, in the hundreds of thousands of dollars annually to implement the provisions of the amended version of this bill.

SUPPORT: (Verified 5/17/19)

California Teamsters Public Affairs Council (source)

American Federation of State, County and Municipal Employees, Local 3299

California Employment Lawyers Association

California Labor Federation, AFL-CIO

California Nurses Association

California School Employees Association, AFL-CIO

National Nurses United

Service Employees International Union, California

State Building and Construction Trades Council, AFL-CIO

UC Student Association

United Automobile Workers Local 2865

United Automobile Workers, Local 4123

United Automobile Workers, Local 5810

University Council-American Federation of Teachers

University Professional and Technical Employees – Communication Workers of America Local 9119, AFL-CIO

OPPOSITION: (Verified 5/17/19)

None received

ARGUMENTS IN SUPPORT: The UC Student Association, writing in support, argues the following:

Section 204 of the Labor Code guarantees workers in the private sector the right to be paid on time, and in doing so, California law recognizes late or missing paychecks as a form of wage theft. The Labor Commissioner adjudicates charges of wage theft, and wages and damages are awarded to workers following a favorable decision. An employer who denies its employees their right to timely payment and adequate breaks is also subject to damages and civil penalties, which, if applied, go into the General Fund. However, under Section 220 of the Labor Code, UC is exempt from the rules that govern employers in the private sector. This exemption has created a lack of accountability for timely pay at UC, which has exacerbated the problem that UC workers are currently facing.

Given the recent incidents of UCPath and the history of mistreatment of student workers at the UC, it is important the SB 698 is taken off of the suspense file and approved through the committee. We believe the state should send a clear message that our University is not above labor laws and that our student workers do not deserve a second-class treatment by our institutions.

Prepared by: Glenn Miles / L., P.E. & R. / (916) 651-1556

5/20/19 13:15:16

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 698 (Leyva) - Employee wages: payment

Bill Summary:

SB 698 would require the University of California (UC) to comply with specified Labor Code provisions relating to the payment of wages to its employees.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 16, 2019

Fiscal Impact:

• UC has yet to determine the costs of this version of the bill; however, costs would likely be, at most, in the hundreds of thousands of dollars annually to implement the provisions of the amended version of the bill (General Fund).
• The Department of Industrial Relations (DIR) would incur minor and absorbable costs.

Author Amendments:

Require UC employees who are paid on a monthly basis to be paid no later than five days after the close of the monthly payroll period and would provide also that those employees who are paid on a more frequent basis be paid in accordance with the pay policies announced in advance by the university.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 698 (Leyva) - Employee wages: payment

Bill Summary:

SB 698 would require the University of California (UC) to comply with specified Labor Code provisions relating to the payment of wages to its employees.

Fiscal Impact:

• UC’s preliminary estimate is that it would incur a cost in the millions of dollars, potentially as high as $12 million, to implement the provisions of the bill (General Fund, see Staff Comments). Most of these costs would be one-time in nature.
• The Department of Industrial Relations (DIR) would incur minor and absorbable costs as a result of the bill.

Background:

Section 204 of the Labor Code guarantees workers the right to be paid on time; consequently, late paychecks can be considered a form of wage theft. The Labor Commissioner within DIR adjudicates charges of wage theft, and wages and damages are awarded to workers for a successful decision. Employers who deny their employees their right to timely payment and adequate breaks are also subject to damages and civil penalties, which are deposited into the General Fund. Under Labor Code Section 220, UC is exempt from the rules that govern employers in the private sector.

Beginning in September 2018, certain low-wage workers at UC performed their work without receiving a paycheck. In some instances, UC clerical and skilled trades workers at affected campuses reportedly waited over a month for their paychecks. The delay in wage payment was the result of UC’s implementation of a new payroll system, UCPath.

Proposed Law:

This bill would specify that, notwithstanding an exemption for public employers, Labor Code Section 204 requiring employers to pay employees all earned wages, as specified, twice per month on designated pay dates shall apply to the Regents of UC. Consequently, UC would also be subject to civil and criminal consequences for failing to comply with Section 204.

Related Legislation:

• SB 341 (Morrell) included a provision that would have made amended the Labor Code to remove the State of California’s existing exception from the requirement to pay all directly employed employees twice each calendar month, on days designated in advance by the employer as regular paydays. The bill failed passage in the Senate Labor, Public Employment and Retirement Committee.
• SB 1234 (Vidak, 2018) would have amended the Labor Code to remove the State of California’s existing exception from the requirement to pay all directly employed employees twice each calendar month, on days designated in advance by the employer as regular paydays. The bill failed passage in the Senate Public Employment and Retirement Committee.

Staff Comments:

Under existing law, DIR has jurisdiction over minimum wages and business reimbursements for employees of UC. This bill would expand this jurisdiction to include the requirement that employers pay wages to their employees twice per calendar month on days designated in advance as regular paydays, and could result in additional claims to DIR. However, the universe of employees that this bill would affect is small and it is unlikely that a significant number of UC employees would be impacted, resulting in minimal impact to DIR, and a minimal increase in penalty revenue deposited into the General Fund.

UC’s anticipated costs resulting from the bill would result from the new procedures and modified pay schedule that it requires, the necessary training of staff, and the policy development work corresponding with these changes. Because the bill would take effect prior to PPS (UC’s legacy payroll system) being completely phased out, there would be costs associated with required changes to two payroll systems. Additionally, UC’s fiscal estimate of the bill includes estimates of waiting time penalties that would occur while UC transitions its pay schedule.

UC indicates that UCPath was not designed to handle the semi-monthly pay cycle required by the bill. In addition, while the pay cycle required in Labor Code Section 204 does not significantly differ from the pay frequency of many UC employees, the bill would still necessitate large-scale changes in how thousands of employees are paid.

Any local government costs resulting from the mandate in this measure are not state-reimbursable because the mandate only involves the definition of a crime or the penalty for conviction of a crime.

-- END --

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Jerry Hill, Chair

2019 - 2020 Regular

Bill No: SB 698 Hearing Date: April 24, 2019

SUBJECT: Employee wages: payment

KEY ISSUE

Should the Legislature require the University of California to comply with Labor Code provisions relating to the payment of wages to its employees?

ANALYSIS

Existing law:

1. Establishes the University of California (UC) as a public trust, administered by the Board of Regents with full powers of organization and government, subject only to such legislative control as may be necessary to insure the security of its funds and compliance with the terms of the endowments of the university and such competitive bidding procedures as may be made applicable to the university by statute for the letting of construction contracts, sales of real property, and purchasing of materials, goods, and services. (Constitution of California, Article IX, Section 9).
2. Preserves Legislative authority to regulate UC in three additional areas:
   1. The power of appropriation, preventing the Regents from compelling appropriations for salaries;
   2. General police power regulations governing private persons and corporations; and
   3. Legislation regulating public agency activity not generally applicable to the public when the legislation regulates matters of statewide concern not involving internal university affairs.

(San Francisco Labor Council v. Regents of University of California (1980) 26 Cal. 3d 785).

1. Requires the Labor Commissioner who heads the Division of Labor Standards Enforcement (DSLE) to investigate and enforce statutes and wage orders of the Industrial Welfare Commission that specify the requirements for the payment of wages by employers. Existing law provides for criminal and civil penalties for violations of statutes and orders of the commission regarding payment of wages (Labor Code Section 21, 79 et seq.).
2. Requires employers to comply with various Labor Code statutes regulating when and how employer pay employees (LC Section 200 et seq.)
3. Exempts public employers from certain Labor Code provisions related to the payment of wages including a provision that requires employers generally to pay employees earned wages twice during each calendar month, on days designated in advance by the employer as the regular paydays (LC 204, LC 220)
4. Establishes the Higher Education Employer-Employee Relations Act (HEERA) to provide a system of collective bargaining between public institutions of higher education and their employees (GC 3560 et seq.).

This bill:

1. Specifies that, notwithstanding an exemption for public employers, Labor Code Section 204 requiring employers to pay employees all earned wages, as specified, twice per month on designated pay dates shall apply to the Regents of the University of California. Consequently, UC would also be subject to civil and criminal consequences for failing to comply with Section 204.
2. Includes language that the bill does not create a reimbursable local mandate pursuant to Section 6 of Article XIII B of the California Constitution as specified.

COMMENTS

1. Need for this bill?

According to the bill’s proponents UC is implementing a new payroll system (UCPath) meant to simplify and standardize payroll procedures systemwide. UC started to plan for UCPath in 2011 and began a phased deployment of the system approximately three years ago. Currently, UC has integrated payroll for approximately 77,000 of UC’s 230,000 employees into UCPath with the remainder expected to be included in the system by the end of 2020. However, implementation has resulted in several payroll errors, delayed and missed payments to employees, improper cancellation of health insurance and other benefits, and failure to deduct social security taxes. The payroll discrepancies have affected thousands of employees and especially created difficulties for lower wage university employees and student employees who may live paycheck to paycheck.

According to a February 25, 2019, Joint UC-United Automobile Workers (UAW) statement regarding payroll issues for academic student employees, “The fall 2018 implementation of UCPath, UC’s new systemwide payroll system, resulted in paycheck inaccuracies for hundreds of academic student employees on several UC campuses.”

The bill’s supporters believe that making UC subject to Labor Code provisions requiring timely payment of wages and providing fines and penalties for violations thereof will create pressure to ensure UC puts forward the necessary attention and resources to ensure UC pays university employees earned wages in a timely fashion. Toward this end, they seek to strip UC of the Labor Code exemption for public employers from certain relevant wage payment protections in the Labor Code.

2. Committee Comments

UC Constitutional Autonomy and Potential Costs to UC

Although this bill seeks to specifically apply certain Labor Code wage payment requirements to UC, UC may still be exempt from the Labor Code requirements under its broad grant of autonomy under the California Constitution. Generally, courts have held that UC is exempt from state Legislative mandates that seek to regulate its internal affairs and have found UC policies toward its employees within the ambit of UC’s internal affairs. On the other hand, courts have held that the Legislature may intrude upon UC’s autonomy where the Legislature is regulating a matter that implicates statewide concerns unless the matter is exclusively internal to the university. Whether the Legislature’s policy of protecting employees from wage theft sufficiently meets the judicial construct of a matter of statewide concern and thus pierces UC’s constitutional autonomy is likely a matter for further litigation. If such litigation ends unfavorably for UC, UC would likely face substantial costs from fines and penalties associated with violations of the relevant Labor Code protections if UC is unable to address the payroll problems associated with UCPath implementation. Nevertheless, it is reasonable for the Legislature to balance the possibility of UC’s self-inflicted costs with the importance of protecting low wage employees from continuous cycles of delayed payment of earned wages and the concomitant harm therefrom.

HEERA and Collective Bargaining

The Higher Education Employer Employee Relations Act generally provides for a system of labor relations between UC and its represented employees. MOUs between the relevant parties generally address issues such as compensation including pay dates and procedures to address violations of the collective bargaining agreement. Thus, the possibility exists that disputes over payroll should be resolved through bargaining.

It appears from a cursory review of current contracts between UC and the sponsors that no provisions address payroll errors. Committee staff understands from the bill’s proponents that UC’s past practice has been to fix payroll errors within 48 hours but that UC has never agreed to bargain over payroll errors and associated remedies. Nevertheless, UC has reached agreements with some employee representatives for affected employees who have filed grievances pursuant to the contract. The aforementioned February 25, 2019, Joint UC-UAW statement also notes that the parties agreed to a resolution that “each affected academic student employee will receive $150 (net after taxes); and employees with paycheck issues of more than one month will receive additional compensation, as appropriate, up to a maximum of $450. These payments are in addition to restitution of any and all wages under the UAW 2865 contract.”

Despite the UC-UAW agreement, it is doubtful that the Legislature ever intended to require Higher Education employees to bargain with UC over ensuring that their paychecks were accurate and timely paid for earned wages, especially considering the Legislature’s general statewide policy imperative that employees should receive their wages when earned.

3. Proponent Arguments

According to United Automobile Workers Local 2865,

SB 698 gives workers at the University of California the same wage and hour protections that workers in the private sector currently enjoy by eliminating the exemption for UC workers in Section 220 of the California Labor Code. This law will encourage university administrators to prioritize accurate, timely, and fair pay of employees at UC.

According to California Teamsters Public Affairs Council,

Amending Section 220 of the Labor Code to require the UC to follow the same rules as private employers will encourage university administrators to prioritize the accurate, timely and fair payment for their employees.

4. Opponent Arguments:

None received.

5. Prior Legislation:

SB 341 (Morrell) of 2019 included a provision that would have made amended the Labor Code to remove the State of California’s existing exception from the requirement to pay all directly employed employees twice each calendar month, on days designated in advance by the employer as regular paydays. SB 341 failed passage in the Senate Labor, Public Employment and Retirement Committee.

SB 1234 (Vidak) of 2018 would have amended the Labor Code to remove the State of California’s existing exception from the requirement to pay all directly employed employees twice each calendar month, on days designated in advance by the employer as regular paydays. SB 1234 failed passage in the Senate Public Employment and Retirement Committee.

SUPPORT

California Teamsters Public Affairs Council (Sponsor)

California Employment Lawyers Association

California Labor Federation, AFL-CIO

California Nurses Association

California School Employees Association, AFL-CIO

California Teamsters Public Affairs Council

National Nurses United

Service Employees International Union, California

State Building and Construction Trades Council, AFL-CIO

United Automobile Workers Local 2865

United Automobile Workers, Local 2865

United Automobile Workers, Local 4123

United Automobile Workers, Local 5810

University Council-American Federation of Teachers

OPPOSITION

None received.

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