(1)Existing law establishes the Department of Industrial Relations in the Labor and Workforce Development Agency, administered by the Director of Industrial Relations, and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. Existing law establishes within the department, among other entities, the Division of Labor Standards Enforcement, the Division of Workers Compensation, and the Division of Occupational Safety and Health, with enforcement duties and powers, as prescribed.

Existing law authorizes the Division of Labor Standards Enforcement, the head of which is the Labor Commissioner, to enforce the Labor Code and all labor laws of the state the enforcement of which is not specifically vested in any other officer, board, or commission. Existing law relating to payment of wages for general occupations provides that nothing in those provisions limits the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the Division of Labor Standards Enforcement.

This bill, until January 1, 2029, would authorize a public prosecutor, as defined, to prosecute an action, either civil or criminal, for a violation of specified provisions of the Labor Code or to enforce those provisions independently. The bill would require moneys recovered by public prosecutors under the Labor Code to be applied first to payments due to affected workers. The bill would also require all civil penalties recovered pursuant to those provisions to be paid to the General Fund of the state, unless otherwise specified. The bill, except as specified, would limit the action of a public prosecutor under the bill to redressing violations occurring within the public prosecutors geographic jurisdiction. The bill would authorize a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations.

This bill would provide that, in any action initiated by a public prosecutor or the Labor Commissioner to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect on the authority of the public prosecutor or the Labor Commissioner to enforce the code. The bill would further provide that any subsequent appeal of the denial of any motion or other court filing to impose such restrictions on a public prosecutor, a division, or the Department of Justice shall not stay the trial court proceedings, notwithstanding specified law.

(2)Existing law prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individuals compensation. Existing law, if the Labor and Workforce Development Agency or a court makes one of several prescribed determinations regarding the violation of those prohibitions, subjects the violator to specified civil penalties. Existing law also authorizes the Labor Commissioner to determine such a violation through investigation and informal hearing and, on making that determination, to issue a citation to assess those civil penalties pursuant to prescribed procedures for issuing, contesting, and enforcing judgments.

This bill would authorize the Labor Commissioner or a public prosecutor, as defined, to enforce these willful misclassification provisions through specified methods, including by investigating an alleged violation, ordering temporary relief, issuance of a citation, and filing a civil action. The bill would also permit specified employees, the Labor Commissioner, or a public prosecutor to alternatively recover certain penalties as damages payable to the employee.

(1)Existing law establishes the Department of Industrial Relations in the Labor and Workforce Development Agency, administered by the Director of Industrial Relations, and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. Existing law establishes within the department, among other entities, the Division of Labor Standards Enforcement, the Division of Workers Compensation, and the Division of Occupational Safety and Health, with enforcement duties and powers, as prescribed.

Existing law authorizes the Division of Labor Standards Enforcement, the head of which is the Labor Commissioner, to enforce the Labor Code and all labor laws of the state the enforcement of which is not specifically vested in any other officer, board, or commission. Existing law relating to payment of wages for general occupations provides that nothing in those provisions limits the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the Division of Labor Standards Enforcement.

This bill, until January 1, 2029, would authorize a public prosecutor, as defined, to prosecute an action, either civil or criminal, for a violation of specified provisions of the Labor Code or to enforce those provisions independently. The bill would require moneys recovered by public prosecutors under the Labor Code to be applied first to payments due to affected workers. The bill would also require all civil penalties recovered pursuant to those provisions to be paid to the General Fund of the state, unless otherwise specified. The bill, except as specified, would limit the action of a public prosecutor under the bill to redressing violations occurring within the public prosecutors geographic jurisdiction. The bill would authorize a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations.

This bill would provide that, in any action initiated by a public prosecutor or the Labor Commissioner to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect on the authority of the public prosecutor or the Labor Commissioner to enforce the code. The bill would further provide that any subsequent appeal of the denial of any motion or other court filing to impose such restrictions on a public prosecutor, a division, or the Department of Justice shall not stay the trial court proceedings, notwithstanding specified law.

(2)Existing law prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individuals compensation. Existing law, if the Labor and Workforce Development Agency or a court makes one of several prescribed determinations regarding the violation of those prohibitions, subjects the violator to specified civil penalties. Existing law also authorizes the Labor Commissioner to determine such a violation through investigation and informal hearing and, on making that determination, to issue a citation to assess those civil penalties pursuant to prescribed procedures for issuing, contesting, and enforcing judgments.

This bill would authorize the Labor Commissioner or a public prosecutor, as defined, to enforce these willful misclassification provisions through specified methods, including by investigating an alleged violation, ordering temporary relief, issuance of a citation, and filing a civil action. The bill would also permit specified employees, the Labor Commissioner, or a public prosecutor to alternatively recover certain penalties as damages payable to the employee.

(1)Existing law establishes the Department of Industrial Relations in the Labor and Workforce Development Agency, administered by the Director of Industrial Relations, and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. Existing law establishes within the department, among other entities, the Division of Labor Standards Enforcement, the Division of Workers Compensation, and the Division of Occupational Safety and Health, with enforcement duties and powers, as prescribed.

Existing law authorizes the Division of Labor Standards Enforcement, the head of which is the Labor Commissioner, to enforce the Labor Code and all labor laws of the state the enforcement of which is not specifically vested in any other officer, board, or commission. Existing law relating to payment of wages for general occupations provides that nothing in those provisions limits the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the Division of Labor Standards Enforcement.

This bill bill, until January 1, 2029, would authorize a public prosecutor, as defined, to prosecute an action, either civil or criminal, for a violation of specified provisions of the Labor Code or to enforce those provisions independently and without specific direction of the Division of Labor Standards Enforcement. independently. The bill would require moneys recovered by public prosecutors under the Labor Code to be applied first to payments due to affected workers. The bill would also require all civil penalties recovered pursuant to those provisions to be paid to the General Fund of the state, unless otherwise specified. The bill, except as specified, would limit the action of a public prosecutor under the bill to redressing violations occurring within the public prosecutors geographic jurisdiction. The bill would authorize a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations.

This bill would provide that, in any action initiated by a public prosecutor, a division within the department, or the Department of Justice prosecutor or the Labor Commissioner to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect on the proceedings or on the authority of the public prosecutor, the division, or the Department of Justice prosecutor or the Labor Commissioner to enforce the code. The bill would further provide that any subsequent appeal of the denial of any motion or other court filing to impose such restrictions on a public prosecutor, a division, or the Department of Justice shall not stay the trial court proceedings, notwithstanding specified law.

(2)Existing law prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individuals compensation. Existing law, if the Labor and Workforce Development Agency or a court makes one of several prescribed determinations regarding the violation of those prohibitions, subjects the violator to specified civil penalties. Existing law also authorizes the Labor Commissioner to determine such a violation through investigation and informal hearing and, on making that determination, to issue a citation to assess those civil penalties pursuant to prescribed procedures for issuing, contesting, and enforcing judgments.

(1)Existing law establishes the Department of Industrial Relations in the Labor and Workforce Development Agency, administered by the Director of Industrial Relations, and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. Existing law establishes within the department, among other entities, the Division of Labor Standards Enforcement, the Division of Workers Compensation, and the Division of Occupational Safety and Health, with enforcement duties and powers, as prescribed.

Existing law authorizes the Division of Labor Standards Enforcement, the head of which is the Labor Commissioner, to enforce the Labor Code and all labor laws of the state the enforcement of which is not specifically vested in any other officer, board, or commission. Existing law relating to payment of wages for general occupations provides that nothing in those provisions limits the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the Division of Labor Standards Enforcement.

This bill would authorize a public prosecutor, as defined, to prosecute an action, either civil or criminal, for a violation of specified provisions of the Labor Code or to enforce those provisions independently and without specific direction of the applicable division. Division of Labor Standards Enforcement. The bill, except as specified, would limit the action of a public prosecutor under the bill to redressing violations occurring within the public prosecutors geographic jurisdiction. The bill would authorize a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations.

This bill would provide that, in any action initiated by a public prosecutor prosecutor, a division within the department, or the Department of Justice to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect on the proceedings or on the authority of the public prosecutor prosecutor, the division, or the Department of Justice to enforce the code. The bill would further provide that any subsequent appeal of the denial of any motion or other court filing to impose such restrictions on a public prosecutor prosecutor, a division, or the Department of Justice shall not stay the trial court proceedings, notwithstanding specified law.

(2)Existing law prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individuals compensation. Existing law, if the Labor and Workforce Development Agency or a court makes one of several prescribed determinations regarding the violation of those prohibitions, subjects the violator to specified civil penalties. Existing law also authorizes the Labor Commissioner to determine such a violation through investigation and informal hearing and, on making that determination, to issue a citation to assess those civil penalties pursuant to prescribed procedures for issuing, contesting, and enforcing judgments.

Existing law, the Labor Code Private Attorneys General Act of 2004 (PAGA), authorizes an aggrieved employee to bring a civil action to recover specified civil penalties that would otherwise be assessed and collected by the Labor and Workforce Development Agency on behalf of the employee and other current or former employees for the violation of certain provisions affecting employees. Existing law generally requires the employee to follow prescribed procedures before bringing an action and establishes alternate procedures for specific categories of violations.

(1)Existing law establishes the Department of Industrial Relations in the Labor and Workforce Development Agency, administered by the Director of Industrial Relations, and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. Existing law establishes within the department, among other entities, the Division of Labor Standards Enforcement, the Division of Workers Compensation, and the Division of Occupational Safety and Health, with enforcement duties and powers, as prescribed.

Existing law authorizes the Division of Labor Standards Enforcement, the head of which is the Labor Commissioner, to enforce the Labor Code and all labor laws of the state the enforcement of which is not specifically vested in any other officer, board, or commission. Existing law relating to payment of wages for general occupations provides that nothing in those provisions limits the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the Division of Labor Standards Enforcement.

This bill would authorize a public prosecutor, as defined, to prosecute an action, either civil or criminal, for a violation of specified provisions of the Labor Code or to enforce the Labor Code those provisions independently and without specific direction of the applicable division. The bill, except as specified, would limit the action of a public prosecutor under the bill to redressing violations occurring within the public prosecutors geographic jurisdiction. The bill would authorize a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations of the Labor Code. violations.

This bill would provide that, in any action initiated by a public prosecutor to enforce the Labor Code, any agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect on the proceedings or on the authority of the public prosecutor to enforce the code. The bill would further provide that any motion or other court filing that seeks to compel a public prosecutor to arbitrate a claim due to any agreement between a worker and employer shall be deemed frivolous and any subsequent appeal of the denial of any motion or other court filing to impose such restrictions on a public prosecutor shall not stay the trial court proceedings, notwithstanding specified law.

(2)Existing law prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individuals compensation. Existing law, if the Labor and Workforce Development Agency or a court makes one of several prescribed determinations regarding the violation of those prohibitions, subjects the violator to specified civil penalties.

This bill, as an alternative in addition to those civil penalties, penalties for misclassification, would authorize the Labor Commissioner to issue a determination that a person or employer has violated a prohibition for recovery pursuant to specified recovery provisions as a civil penalty, through the issuance of a citation. The bill would prescribe the procedures for issuing, contesting, and enforcing judgments for citations issued under the bill. The bill would entitle an employee, for the same violation, to either recovery under the bill or by enforcement of a civil penalty pursuant to the Labor Code Private Attorneys General Act of 2004. PAGA. The bill would authorize the Labor Commissioner to enforce these provisions by informal hearing or in a civil suit.

Existing law establishes, within the Labor and Workforce Development Agency, the Department of Industrial Relations, which is under the control of the Director of Industrial Relations, and establishes within the department the Division of Labor Standards Enforcement, which is under the control of the Labor Commissioner. Existing law vests with the commissioner the authority to receive, investigate, and hear employee complaints regarding the payment of wages and other employment-related issues. Existing law authorizes citations to be served, as specified.

This bill would state the intent of the Legislature to enact legislation to strengthen labor law enforcement efforts and to protect workers from wage theft and other labor violations by expanding the authority of public enforcement agencies.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 594

Author:(Maienschein)

As Amended Ver:September 8, 2023

Majority vote

SUMMARY

Authorizes, until January 1, 2029, public prosecutors to sue for certain violations of the Labor Code independently of the Department of Labor Standards Enforcement (DLSE) and nullifies any agreements that limit an employee's right to file in court on behalf of themselves or in a representative action. Permits, in an action for willful misclassification, the recovery of penalties by the employee as a statutory penalty or as a civil penalty.

Senate Amendments

1. Make clarifying and technical changes.
2. Add that the definition of "public prosecutor" includes the Attorney General.
3. Exclude from the violations of the Labor Code that a public prosecutor may prosecute or seek injunctive relief for those violations related to agricultural labor relations, the Private Attorneys General Act, and the California Apprenticeship Council.
4. Provide that moneys recovered by public prosecutors under this code shall be first applied to payments, as specified, due to affected workers. All civil penalties recovered by a public prosecutor pursuant to this chapter shall be paid to the General Fund of this state, unless otherwise specified.
5. Make the awarding of reasonable attorney's fees and costs to a prevailing plaintiff permissive and equal to the amount the Labor Commissioner is entitled to collect.
6. Add that a public prosecutor is required to provide a 14-day notice to the DLSE prior to prosecuting an action under this bill.
7. Provide that the DLSE has the right to intervene in any court proceedings brought pursuant to this section by a public prosecutor unless the public prosecutor has statewide authority or has enforcement authority under unfair competition law, in which case intervention shall be permissive.
8. Add a sunset date of January 1, 2029.
9. Clarify that where a public prosecutor or the Labor Commissioner initiates an action to enforce this code, any employment agreement between an employer and a worker to limit representative actions or to mandate arbitration, shall have no effect.
10. Make the provisions of the act severable.

COMMENTS

The extent of worker misclassification cannot be underscored. A 2000 study commissioned by the United States Department of Labor found that nationally between 10% and 30% of audited employers misclassified workers.^[1] As our workplaces and the nature of the employee-employer relationship evolves, new opportunities for misclassification have emerged. In 2017, California's Employment Development Department Tax Audit Program conducted 7,937 audits and investigations, resulting in assessments totaling $249,981,712, and identified nearly half a million unreported employees.^[2] Recent research also supports the prevalence of misclassification and finds some of the highest misclassification rates in the economy's growth industries, including home care, janitorial, trucking, construction, hospitality, security, and the app-based "on demand" sector.^[3]

Wage theft in California, which impacts low-wage workers disproportionately, is well documented. A 2022 report to the Legislature on the state's wage claim adjudication process reveals that there were nearly 19,000 wage claims filed in 2021 with a total of $335 million being owed to workers.^[4] Due to challenges in staffing, resources, and a growing case backlog, only approximately $40 million has been in paid in awards or settlements through the wage claim adjudication unit of the DLSE.^[5]

Committee comments

While the opposition argues that the bill gives broad authority to local prosecutors to prosecute claims under the Labor Code, recent amendments to the bill narrow the scope of their authority to violations of Division 2 and 3 of the code, which primarily deal with wage and hour and employee classification provisions.

According to the Author

"The current system of labor law enforcement is inadequate to meet the needs of California's immense workforce. As a result, companies that violate labor laws are unlikely to get caught. This creates a race to the bottom where employers cut costs on the backs of workers. Law-abiding employers are put at a competitive disadvantage for resisting the business model of labor law violation.

California must do better in protecting workers' rights and holding abusive companies accountable. This bill provides new tools to public enforcement agencies to cite violators, win injunctive relief and provide timely justice to workers."

Arguments in Support

The California Labor Federation, sponsor of this bill, states, "Despite the best efforts of the Labor Commissioner and local agencies, enforcement of labor law violations is inadequate to meet the needs of California's immense workforce. This state is home to 19 million workers, many of whom work in industries known to have high rates of labor law violations. There are numerous barriers to enforcement even if agencies were well-funded, but instead, these agencies are underfunded and understaffed.

Companies continue to develop more sophisticated ways to evade the law, including complex layers of contracting, the use of fictitious LLC and franchise agreements, app-based dispatch, and the widespread use of mandatory arbitration as a condition of employment. These practices make enforcement more time-intensive, limit workers' ability to prove their claims, and prevent enforcement agencies from holding the responsible party liable.

In addition, the failure to enact immigration reform has left millions of immigrant workers trapped in jobs where their rights are violated, and employers use immigration threats to prevent them from reporting. These conditions require enforcement agencies to be proactive, strategic and culturally competent to provide outreach, education, and assistance. New tools like deferred action for workers in labor disputes offer some hope but only if enforcement agencies have the resources to utilize them."

Arguments in Opposition

The California Chamber of Commerce and others argue, "While we appreciate and support the efforts to increase state enforcement of labor laws, public prosecutors are already permitted under Labor Code section 218 to prosecute a number of wage and hour violations. Intentionally withholding wages is also already a crime for which employers can be prosecuted in a criminal action…

Providing this broad of authority to an array of local officials raises concerns regarding inconsistency in enforcement of the law. As raised in connection with prior legislation regarding local enforcement of statewide laws, different cities and counties are likely to have significantly different enforcement. The cases they choose, their proffered interpretations of the law, the quality of investigation and prosecution, and whether they have the resources to prosecute is likely to vary significantly. Efforts to bolster enforcement should be focused on improving DLSE statewide enforcement rather than side-stepping that issue by deputizing local city and county officials."

FISCAL COMMENTS

According to the Senate Appropriations Committee:

1. The Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $931,000, and $876,000 annually thereafter, to implement the provisions of the bill (Labor Enforcement and Compliance Fund).
2. The bill would result in unknown court workload cost pressures by authorizing another entity (public prosecutors) to enforce labor law violations in court (Trial Court Trust Fund, General Fund). See Staff Comments for additional details.
3. To the extent authorizing public prosecutors to enforce existing labor laws reduces the backlog of claims pending with the Labor Commissioner, this bill could reduce cost pressures to fund additional DIR enforcement efforts. The enacted 2023-24 state budget provided an additional $13.7 million for DIR to help address wage claim processing times.

VOTES:

ASM LABOR AND EMPLOYMENT: 5-2-0

YES: Kalra, Haney, Ortega, Reyes, Ward

NO: Flora, Chen

ASM JUDICIARY: 8-3-0

YES: Maienschein, Connolly, Haney, Kalra, Pacheco, Papan, Reyes, Robert Rivas

NO: Essayli, Dixon, Sanchez

ASM APPROPRIATIONS: 11-4-1

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

NO: Megan Dahle, Dixon, Mathis, Sanchez

ABS, ABST OR NV: Robert Rivas

ASSEMBLY FLOOR: 52-17-11

YES: Addis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Santiago, Schiavo, Ting, Valencia, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO: Alanis, Chen, Megan Dahle, Davies, Dixon, Essayli, Flora, Vince Fong, Gallagher, Hoover, Lackey, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

ABS, ABST OR NV: Aguiar-Curry, Bains, Grayson, Kalra, Mathis, Stephanie Nguyen, Pacheco, Papan, Blanca Rubio, Soria, Villapudua

UPDATED

VERSION: September 8, 2023

CONSULTANT: Megan Lane / L. & E. / (916) 319-2091 FN: 0002288

1. See the National Employment Law Project's (NELP) Fact Sheet "Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries," https://www.nelp.org/publication/independent-contractor-misclassification-imposes-huge-costs-on-workers-and-federal-and-state-treasuries-update-2017/. ↑

2. Employment Development Department 2018 Annual Report on Fraud Deterrence and Detection Activities, https://edd.ca.gov/About_EDD/pdf/Fraud_Deterrence_and_Detection_Activities_2018.pdf. ↑

3. See NELP's Fact Sheet in footnote 1. ↑

4. Wage Claims Adjudication Unit Annual Report Pursuant to Labor Code Section 96.1, Calendar Year 2021, California Labor Commissioner's Office, p. 15. ↑

5. Ibid. ↑

 THIRD READING  

Bill No: AB 594

Author: Maienschein (D), et al.

Amended: 9/8/23 in Senate

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 4-1, 6/28/23

AYES: Cortese, Durazo, Laird, Smallwood-Cuevas

NOES: Wilk

SENATE JUDICIARY COMMITTEE: 9-2, 7/11/23

AYES: Umberg, Allen, Ashby, Caballero, Durazo, Laird, Min, Stern, Wiener

NOES: Wilk, Niello

SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/1/23

AYES: Portantino, Ashby, Bradford, Wahab, Wiener

NOES: Jones, Seyarto

ASSEMBLY FLOOR: 52-17, 5/25/23 - See last page for vote

SUBJECT: Labor Code: alternative enforcement

SOURCE: California Labor Federation

DIGEST:

This bill, until January 1, 2029, clarifies and expands public prosecutors’ authority to enforce the violation of specified labor laws through civil or criminal actions without specific authorization from the Division of Labor Standards Enforcement. This bill clarifies who has this authority, that the authority is limited to the prosecutor’s geographic jurisdiction, except as specified, and makes other changes relating to enforcement of employee misclassification violations.

Senate Floor Amendments of 9/8/23 (1) limit public prosecutors authority to enforce labor law to their specified geographic jurisdiction unless otherwise authorized; (2) exclude from the public prosecutors authority to enforce provisions related to the Agricultural Labor Relations Act, the Private Attorneys General Act of 2004 and apprenticeship and preapprenticeships; (3) require all civil penalties recovered to be paid to the general fund; (4) limit attorney’s fees to the same amount that can be awarded to the Labor Commissioner; (5) require a notice to DLSE at least 14 days prior to pursuing an action; (6) add a January 1, 2029 sunset date on the public prosecutor enforcement provisions; and (7) make changes to the enforcement and remedies in existing law for violations of employee misclassification.

ANALYSIS:

Existing law:

1. Establishes the Department of Industrial Relations (DIR) in the Labor and Workforce Development Agency (LWDA), and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners. (Labor Code §50.5)
2. Establishes within DIR, various entities including the Division of Labor Standards Enforcement (DLSE) under the direction of the Labor Commissioner (LC), and empowers the LC with robust enforcement of labor laws. (Labor Code §79-107)
3. Provides that nothing in the payment of wages provisions of the labor code limit the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the LC. (Labor Code §218)
4. Prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individual’s compensation. Specifies civil penalties for employers engaged in any acts of misclassification of employees per the above. (Labor Code §226.8)
5. Establishes a citation process for the LC to enforce violations of labor law, including minimum wage violations, and provides procedures for citations, appeals and collection of penalties and remedies. (Labor Code §96 & §1197.1 et seq.)

This bill:

1. Makes various findings and declarations regarding the pervasiveness of wage theft in California, its impact on local communities and the state at large, and the role of public enforcement agencies in curbing the practice.

Public Prosecutor Provisions

1. Defines “public prosecutor” to mean the Attorney General, a district attorney, a city attorney, a county counsel, or any other city or county prosecutor.
2. Authorizes, in addition to any other remedies available, a public prosecutor to prosecute an action, either civil or criminal, for a violation of Divisions 1, Division 2, excluding Part 3.5 and Part 13, and Division 3, excluding Chapter 4, of the Labor Code or to enforce those sections independently.
   1. Division 1 covers much of the administrative implementation for DIR.
   2. Division 2 covers employment regulation and supervision, including wages, hours and industry specific provisions.
      1. Part 3.5 covers the Agricultural Labor Relations Act
      2. Part 13 covers the Private Attorneys General Act of 2004
   3. Division 3 covers employment relations – employee definitions and obligations on employers, as well as termination provisions.
      1. Chapter 4 covers apprenticeship and preapprenticeships
3. Specifies that moneys recovered by public prosecutors under these provisions shall be applied first to payments, such as wages, damages, and other penalties, due to affected workers and all civil penalties recovered shall be paid to the General Fund, unless otherwise specified in labor code.
4. Limits the authority of a public prosecutor under these provisions to redressing violations occurring within the public prosecutor’s geographic jurisdiction, unless the public prosecutor has statewide authority or has enforcement authority pursuant to section 17204 of the Business and Professions Code.
5. Specifies that nothing in these provisions shall divest DLSE of its authority to enforce the labor code and all labor laws of the state, as specified.
6. Authorizes a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations of specified Labor Codes.
7. Authorizes a court to award a prevailing plaintiff in that action its reasonable attorney’s fees and costs, including expert witness fees and costs to the extent the LC would be entitled to such fees in an action.
8. Requires a public prosecutor to provide a 14-day notice to DLSE prior to prosecuting an action and provides that a public prosecutor’s failure to provide this notice shall not constitute a defense to the action.
9. Provides that the DLSE shall have the right to intervene in any court proceedings brought pursuant to these provisions unless the public prosecutor has statewide authority or has enforcement authority pursuant to Section 17204 of the Business and Professions Code, in which case intervention shall be permissive.
10. Includes a January 1, 2029 sunset date on the public prosecutor enforcement provisions, however, specifies that this sunset date shall not apply to any action initiated in court by a public prosecutor prior to January 1, 2029.

Employee Misclassification Violations

1. Provides that in any action initiated by a public prosecutor or the LC to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect, as specified.
   1. Provides that any subsequent appeal of the denial of any motion or other court filing to impose such restrictions shall not stay the trial court proceedings, notwithstanding Section 916 of the Code of Civil Procedure.
   2. Provides that an individual agreement does not include a collective bargaining agreement.
2. Amends existing Labor Code Section 226.8 (on unlawful misclassification of employees) to expand and strengthen the existing enforcement mechanisms for violations to specify that enforcement of violations includes:
   1. Investigating an alleged violation;
   2. Ordering appropriate temporary relief to mitigate the violation or to maintain the status quo pending the completion of an investigation or hearing;
   3. Issuance of a citation against an employer who violates these provisions; and
   4. Filing a civil action.
3. Specifies that a public prosecutor may also enforce violations for misclassification of employees by seeking the damages described above.
4. Provides that in any enforcement action, as specified, the LC or a public prosecutor may alternatively recover the penalties set forth as damages payable to the employee. However, specifies that an employee is entitled to either recover the damages as provided for in these provisions or to enforce a civil penalty, as set forth under the Private Attorneys General Act (PAGA), but not both, for the same violation.
5. Provides that, except as specified, the remedy provided by these provisions is cumulative and does not limit the availability of any other remedy available to the employee.
6. Provides that if a citation is issued, the procedures for issuing, contesting, and enforcing judgments and civil penalties issued by the LC shall be the same as those in existing law.
7. Provides that the provisions of this bill are severable and if any provision or its application are held invalid, that invalidity shall not affect other provisions or applications that can be given effect.

Background

DLSE Understaffed = Wage Claim Backlogs. Created in 1976, the Berman wage claim process was created to informally resolve wage disputes, primarily of minimum wage violations. Over the years, this process has expanded to include additional laws that can be adjudicated through the wage claim process, as well as various employee employer relationships (misclassification) and liabilities. As part of this expansion, the Legislature has also designed recovery tools that require more time and resources to process. This expansion, combined with population growth that has not kept pace with staffing levels at DIR has led to wage claim backlogs that have left workers waiting months or even years for any recovery of wages. While current law requires wage claims to be heard within 120 days, absent a settlement agreement, and a decision issued within 15 days, the average wait time for a wage claim in 2021 was 335 days.^[1]

[NOTE: Please see the Senate Labor, Public Employment and Retirement Committee analysis on this bill for more background information.]

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

According to the Senate Appropriations Committee:

• DIR indicates that it would incur first-year costs of $931,000, and $876,000 annually thereafter, to implement the provisions of the bill (Labor Enforcement and Compliance Fund).
• This bill would result in unknown court workload cost pressures by authorizing another entity (public prosecutors) to enforce labor law violations in court (Trial Court Trust Fund, General Fund). 
• To the extent authorizing public prosecutors to enforce existing labor laws reduces the backlog of claims pending with the LC, this bill could reduce cost pressures to fund additional DIR enforcement efforts. The enacted 2023-24 state budget provided an additional $13.7 million for DIR to help address wage claim processing times.

SUPPORT: (Verified 9/8/23)

California Labor Federation (source)

Alameda Labor Council

American Federation of State, County and Municipal Employees

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Employment Lawyers Association

California Federation of Teachers

California Nurses Association

California Professional Firefighters

California Rural Legal Assistance Foundation, Inc.

California School Employees Association

California State Council of Service Employees International Union

California State Legislative Board, Sheet Metal, Air, Rail and Transportation Workers – Transportation Division

California Teamsters Public Affairs Council

Central Coast Labor Council

Consumer Attorneys of California

Contra Costa Central Labor Council

Council of Community Housing Organizations

Elevator Constructors Local 8

Engineers and Scientists of California, IFPTE Local 20

International Union of Operating Engineers, Cal-Nevada Conference

Los Angeles County Federation of Labor, AFL-CIO

North Bay Labor Council

Renaissance Entrepreneurship Center

Sacramento Central Labor Council, AFL-CIO

San Diego City Attorney's Office

San Francisco City Attorney's Office

TechEquity Collaborative

UFCW - Western States Council

UNITE HERE, AFL-CIO

Utility Workers Union of America

OPPOSITION: (Verified 9/8/23)

Acclamation Insurance Management Services

Allied Managed Care

Associated Builders and Contractors of California

Associated General Contractors of California

Associated General Contractors San Diego Chapter

California Association for Health Services At Home

California Association of Joint Powers Authorities

California Association of Sheet Metal & Air Conditioning Contractors

California Association of Winegrape Growers

California Attractions and Parks Association

California Bankers Association

California Building Industry Association

California Business Roundtable

California Chamber of Commerce

California Coalition on Workers Compensation

California Farm Bureau

California League of Food Producers

California Manufactures & Technology Association

California New Car Dealers Association

California Restaurant Association

California Retailers Association

California Trucking Association

Coalition of Small and Disabled Veteran Businesses

Construction Employers' Association

Family Business Association of California

Flasher Barricade Association

National Federation of Independent Business

Western Growers Association

ARGUMENTS IN SUPPORT: According to the sponsors of this bill, “Despite the best efforts of the Labor Commissioner and local agencies, enforcement of labor law violations is inadequate to meet the needs of California’s immense workforce. This state is home to 19 million workers, many of whom work in industries known to have high rates of labor law violations. There are numerous barriers to enforcement even if agencies were well-funded, but instead, these agencies are underfunded and understaffed. Companies continue to develop more sophisticated ways to evade the law, including complex layers of contracting, the use of fictitious LLC and franchise agreements, app-based dispatch, and the widespread use of mandatory arbitration as a condition of employment. These practices make enforcement more time-intensive, limit workers’ ability to prove their claims, and prevent enforcement agencies from holding the responsible party liable.”

ARGUMENTS IN OPPOSITION: A coalition of employers, including the California Chamber of Commerce, are opposed to the measure arguing that, “Providing this broad of authority to an array of local officials raises concerns regarding inconsistency in enforcement of the law.” They argue that “Efforts to bolster enforcement should be focused on improving DLSE statewide enforcement rather than side-stepping that issue by deputizing local city and county officials.”

Furthermore, they argue that, “AB 594 has no prohibition on local entities contracting with private attorneys for enforcement. Currently, local prosecutors across the state contract out their enforcement authority to private attorneys for various reasons. The bill’s attorney’s fees provision also raises concerns regarding motivation.”

ASSEMBLY FLOOR: 52-17, 5/25/23

AYES: Addis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Santiago, Schiavo, Ting, Valencia, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NOES: Alanis, Chen, Megan Dahle, Davies, Dixon, Essayli, Flora, Vince Fong, Gallagher, Hoover, Lackey, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

NO VOTE RECORDED: Aguiar-Curry, Bains, Grayson, Kalra, Mathis, Stephanie Nguyen, Pacheco, Papan, Blanca Rubio, Soria, Villapudua

Prepared by: Alma Perez-Schwab / L., P.E. & R. / (916) 651-1556

9/11/23 12:48:38

**** END ****

1. Jeanne Kuang and Alejandro Lazo, Wage theft whack-a-mole: California workers win judgments against bosses but still don’t get paid, CalMatters (September 28, 2022) available at https://calmatters.org/california-divide/2022/09/california-wage-theft-cases/. ↑

 THIRD READING  

Bill No: AB 594

Author: Maienschein (D), et al.

Amended: 5/18/23 in Assembly

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 4-1, 6/28/23

AYES: Cortese, Durazo, Laird, Smallwood-Cuevas

NOES: Wilk

SENATE JUDICIARY COMMITTEE: 9-2, 7/11/23

AYES: Umberg, Allen, Ashby, Caballero, Durazo, Laird, Min, Stern, Wiener

NOES: Wilk, Niello

SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/1/23

AYES: Portantino, Ashby, Bradford, Wahab, Wiener

NOES: Jones, Seyarto

ASSEMBLY FLOOR: 52-17, 5/25/23 - See last page for vote

SUBJECT: Labor Code: alternative enforcement

SOURCE: California Labor Federation

DIGEST:

This bill clarifies and strengthens public prosecutors’ authority to independently enforce California labor laws in their jurisdictions through prosecuting civil and criminal actions for violations without specific authorization from the Division of Labor Standards Enforcement. This bill clarifies who has this authority, that the authority is limited to the prosecutor’s geographic jurisdiction, except as specified, and makes other changes relating to enforcement of labor laws.

ANALYSIS:

Existing law:

1. Establishes the Department of Industrial Relations (DIR) in the Labor and Workforce Development Agency (LWDA), and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. (Labor Code §50.5)
2. Establishes within the DIR, various entities including the Division of Labor Standards Enforcement (DLSE) under the direction of the Labor Commissioner (LC), and empowers the LC with ensuring a just day’s pay in every workplace and promotes economic justice through robust enforcement of labor laws. (Labor Code §79-107)
3. Requires the LC and authorized deputies and representatives, upon the filing of a claim by an employee, as specified, to, among others, take assignments of:
   1. Wage claims and incidental expense accounts and advances.
   2. Mechanics’ and other liens of employees.
   3. Claims based on “stop orders” for wages and on bonds for labor.
   4. Claims for damages for misrepresentations of conditions of employment.
   5. Claims for penalties for nonpayment of wages.
   6. Claims for vacation, severance, or other supplemental compensation.
   7. Claims for loss of wages from discharge for the garnishment of wages.
   8. Claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer’s premises. (Labor Code §96)
4. Provides that nothing in the payment of wages provisions of the labor code limit the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the LC. (Labor Code §218)
5. Prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individual’s compensation. Specifies civil penalties for employers engaged in any acts of misclassification of employees per the above. (Labor Code §226.8)
6. Establishes a citation process for the LC to enforce violations of the minimum wage that includes, but is not limited to, the following procedural requirements:
   1. A citation issued to an employer must be in writing and shall describe the nature of the violation, including reference to the statutory provision alleged to have been violated, if contract wages are unpaid, or both.
   2. The LC shall promptly take all appropriate action to enforce the citation and to recover the civil penalty assessed, wages, liquidated damages, and any applicable penalties, as specified.
   3. To contest a citation, a person shall within 15 business days after service of the citation, notify the office of the LC that appears on the citation of their appeal by a request for an informal hearing. The LC or their deputy or agent shall, within 30 days, hold a hearing.
   4. The decision of the LC shall consist of a notice of findings, findings, and an order, all of which shall be served on all parties to the hearing within 15 days after the hearing by regular first-class mail.
   5. Any amount found due by the LC as a result of a hearing shall become due and payable 45 days after notice of the findings, written findings, and order have been mailed to the party assessed. A writ of mandate may be taken from this finding to the appropriate superior court.
   6. As a condition to filing a petition for a writ of mandate, the petitioner seeking the writ shall first post a bond with the LC equal to the total amount of any minimum wages, contract wages, liquidated damages, and overtime compensation that are due and owing, as specified.
   7. A person to whom a citation has been issued shall, in lieu of contesting a citation pursuant to this section, transmit to the office of the LC designated on the citation the amount specified for the violation within 15 business days after issuance of the citation. (Labor Code §1197.1 et seq.)

This bill:

1. Makes various findings and declarations regarding the pervasiveness of wage theft in California, its impact on local communities and the state at large, and the role of public enforcement agencies in curbing the practice.
2. Defines “public prosecutor” to mean a district attorney, a city attorney, a county counsel, or any other city or county prosecutor.
3. Authorizes a public prosecutor to prosecute an action, either civil or criminal, for a violation of Divisions 1, 2 or 3 of the Labor Code or to enforce those sections independently and without specific direction of the DLSE.
   1. Division 1 covers much of the administrative implementation for DIR.
   2. Division 2 covers employment regulation and supervision, including wages, hours and industry specific provisions.
   3. Division 3 covers employment relations – employee definitions and obligations on employers, as well as termination provisions.
4. Limits the authority of a public prosecutor under these provisions to redressing violations occurring within the public prosecutor’s geographic jurisdiction, unless the public prosecutor is in a city with a population in excess of 750,000 or is otherwise authorized to enforce this code statewide.
5. Authorizes a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations of the Labor Code.
6. Requires a court to award a prevailing plaintiff in that action its reasonable attorney’s fees and costs, including expert witness fees.
7. Provides that in any action initiated by a public prosecutor, a division in the department, or the Department of Justice to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect, as specified.
   1. Provides that any subsequent appeal of the denial of any motion or other court filing to impose such restrictions shall not stay the trial court proceedings, notwithstanding Section 916 of the Code of Civil Procedure.
   2. Provides that an individual agreement does not include a collective bargaining agreement.
8. Authorizes, in an action for willful misclassification of employees, the recovery of penalties by the employee as a statutory penalty or by the LC as a civil penalty through the issuance of a citation. The procedures for issuing, contesting, and enforcing judgments for citations under these provisions shall be the same as provided in Labor Code Section 1197.1.
9. Specifies that an employee is entitled to only one of the following (not both) for the same violation of willful misclassification, per the above:
   1. To recover the statutory penalty as provided for in this bill; or
   2. To enforce a civil penalty pursuant to the Private Attorneys General Act.

Background

Wage Theft and Worker Misclassification. Wage theft in California, which impacts low-wage workers disproportionately, is well documented. Wage theft captures many labor law violations including violations of the minimum wage, overtime, denied meal periods or misclassification of employees as independent contractors, among others. In 2022, the Labor Commissioner’s office recovered through the wage claim process an average of 63% of wages owed, totaling more than $47 million paid to workers.

DLSE Understaffed = Wage Claim Backlogs. Created in 1976, the Berman wage claim process was created to informally resolve wage disputes, primarily of minimum wage violations. Over the years, this process has expanded to include additional laws that can be adjudicated through the wage claim process, as well as various employee employer relationships (misclassification) and liabilities. As part of this expansion, the Legislature has also designed recovery tools that require more time and resources to process. This expansion, combined with population growth that has not kept pace with staffing levels at DIR has led to wage claim backlogs that have left workers waiting months or even years for any recovery of wages. While current law requires wage claims to be heard within 120 days, absent a settlement agreement, and a decision issued within 15 days, the average wait time for a wage claim in 2021 was 335 days.^[1]

[NOTE: Please see the Senate Labor, Public Employment and Retirement Committee analysis on this bill for more background information.]

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

According to the Senate Appropriations Committee:

• DIR indicates that it would incur first-year costs of $931,000, and $876,000 annually thereafter, to implement the provisions of the bill (Labor Enforcement and Compliance Fund).
• This bill would result in unknown court workload cost pressures by authorizing another entity (public prosecutors) to enforce labor law violations in court (Trial Court Trust Fund, General Fund). 
• To the extent authorizing public prosecutors to enforce existing labor laws reduces the backlog of claims pending with the LC, this bill could reduce cost pressures to fund additional DIR enforcement efforts. The enacted 2023-24 state budget provided an additional $13.7 million for DIR to help address wage claim processing times.

SUPPORT: (Verified 9/1/23)

California Labor Federation (source)

Alameda Labor Council

American Federation of State, County and Municipal Employees

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Employment Lawyers Association

California Federation of Teachers

California Nurses Association

California Professional Firefighters

California Rural Legal Assistance Foundation, INC.

California School Employees Association

California State Council of Service Employees International Union

California State Legislative Board, Sheet Metal, Air, Rail and Transportation Workers – Transportation Division

California Teamsters Public Affairs Council

Central Coast Labor Council

Consumer Attorneys of California

Contra Costa Central Labor Council

Council of Community Housing Organizations

Elevator Constructors Local 8

Engineers and Scientists of California, IFPTE Local 20

International Union of Operating Engineers, Cal-Nevada Conference

Los Angeles County Federation of Labor, AFL-CIO

North Bay Labor Council

Renaissance Entrepreneurship Center

Sacramento Central Labor Council, AFL-CIO

San Diego City Attorney's Office

San Francisco City Attorney's Office

TechEquity Collaborative

UFCW - Western States Council

UNITE HERE, AFL-CIO

Utility Workers Union of America

OPPOSITION: (Verified 9/1/23)

Acclamation Insurance Management Services

Allied Managed Care

Associated Builders and Contractors of California

Associated General Contractors of California

Associated General Contractors San Diego Chapter

California Association for Health Services At Home

California Association of Joint Powers Authorities

California Association of Sheet Metal & Air Conditioning Contractors

California Association of Winegrape Growers

California Attractions and Parks Association

California Bankers Association

California Building Industry Association

California Business Roundtable

California Chamber of Commerce

California Coalition on Workers Compensation

California Farm Bureau

California League of Food Producers

California Manufactures & Technology Association

California New Car Dealers Association

California Restaurant Association

California Retailers Association

California Trucking Association

Coalition of Small and Disabled Veteran Businesses

Construction Employers' Association

Family Business Association of California

Flasher Barricade Association

National Federation of Independent Business

Western Growers Association

ARGUMENTS IN SUPPORT: According to the sponsors of this bill, “Despite the best efforts of the Labor Commissioner and local agencies, enforcement of labor law violations is inadequate to meet the needs of California’s immense workforce. This state is home to 19 million workers, many of whom work in industries known to have high rates of labor law violations. There are numerous barriers to enforcement even if agencies were well-funded, but instead, these agencies are underfunded and understaffed. Companies continue to develop more sophisticated ways to evade the law, including complex layers of contracting, the use of fictitious LLC and franchise agreements, app-based dispatch, and the widespread use of mandatory arbitration as a condition of employment. These practices make enforcement more time-intensive, limit workers’ ability to prove their claims, and prevent enforcement agencies from holding the responsible party liable.”

ARGUMENTS IN OPPOSITION: A coalition of employers, including the California Chamber of Commerce, are opposed to the measure arguing that, “Providing this broad of authority to an array of local officials raises concerns regarding inconsistency in enforcement of the law. As raised in connection with prior and pending legislation regarding local enforcement of statewide laws, different cities and counties are likely to have significantly different enforcement. The cases they choose, their proffered interpretations of the law, the quality of investigation and prosecution, and whether they have the resources to prosecute is likely to vary significantly. Our concern is further exacerbated by language in the bill that allows some local prosecutors to prosecute across the state and forbids others from doing so. Efforts to bolster enforcement should be focused on improving DLSE statewide enforcement rather than side-stepping that issue by deputizing local city and county officials.”

Furthermore, they argue that, “AB 594 has no prohibition on local entities contracting with private attorneys for enforcement. Currently, local prosecutors across the state contract out their enforcement authority to private attorneys for various reasons. The bill’s attorney’s fees provision also raises concerns regarding motivation.”

ASSEMBLY FLOOR: 52-17, 5/25/23

AYES: Addis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Santiago, Schiavo, Ting, Valencia, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NOES: Alanis, Chen, Megan Dahle, Davies, Dixon, Essayli, Flora, Vince Fong, Gallagher, Hoover, Lackey, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

NO VOTE RECORDED: Aguiar-Curry, Bains, Grayson, Kalra, Mathis, Stephanie Nguyen, Pacheco, Papan, Blanca Rubio, Soria, Villapudua

Prepared by: Alma Perez-Schwab / L., P.E. & R. / (916) 651-1556

9/2/23 12:38:45

**** END ****

1. Jeanne Kuang and Alejandro Lazo, Wage theft whack-a-mole: California workers win judgments against bosses but still don’t get paid, CalMatters (September 28, 2022) available at https://calmatters.org/california-divide/2022/09/california-wage-theft-cases/. ↑

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 594 (Maienschein) - Labor Code: alternative enforcement

Bill Summary:

AB 594 would clarify and expand public prosecutors’ authority to prosecute civil and criminal actions for specified California labor code violations.

Fiscal Impact:

• The Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $931,000, and $876,000 annually thereafter, to implement the provisions of the bill (Labor Enforcement and Compliance Fund).
• The bill would result in unknown court workload cost pressures by authorizing another entity (public prosecutors) to enforce labor law violations in court (Trial Court Trust Fund, General Fund).  See Staff Comments for additional details.
• To the extent authorizing public prosecutors to enforce existing labor laws reduces the backlog of claims pending with the Labor Commissioner, this bill could reduce cost pressures to fund additional DIR enforcement efforts. The enacted 2023-24 state budget provided an additional $13.7 million for DIR to help address wage claim processing times.

Background:

California has enacted a variety of laws aimed at protecting employees in the state and ensuring they can be made whole when they are wronged by their employer. However, such laws require enforcement, and labor law violations continue to be a major problem across the State. Between 2017 and 2020, over $221 million in unpaid wages were recovered in actions by both DIR and the Office of the Attorney General (AG). Such violations are often in the form of wage theft, when an employer steals from an employee’s wages by not paying for the full time worked or by not paying appropriate overtime. They also can occur through misclassification of workers, in which an employer incorrectly classifies an employee as an independent contractor. When an employer classifies an employee as an independent contractor, they can deny that employee the wage and hour, overtime, and other protections that classification as an employee provides. In addition, it allows employers to unlawfully charge employees for the tools required for their job. One study found that 90 percent of businesses inspected by the state were out of compliance with worker classification laws.

When labor law is violated, employees and the public have limited options to ensure compliance. The main public enforcement agency for the labor code is chronically backlogged with cases. The Labor Commissioner, the office that hears and adjudicates labor law violations, received 19,000 complaints in 2021, and has been continually dealing with staffing and funding shortages. In light of those issues, cases typically take on average 505 days to be adjudicated. With such long processing times, many simply give up and withdraw their claims.

Proposed Law:

This bill would, among other things, do the following:

• Authorize a public prosecutor, as defined, to prosecute an action, either civil or criminal, for a violation of Divisions One, Two or Three of the Labor Code or to enforce those sections independently and without specific direction of the Division of Labor Standards Enforcement, the Division of Workers' Compensation, or the Division of Occupational Safety and Health, as applicable.
• Limit the authority of a public prosecutor to enforcing violations occurring within the public prosecutor's geographic jurisdiction, unless the public prosecutor is in a city with a population in excess of 750,000 or is otherwise authorized to enforce the Labor Code statewide.
• Authorize a public prosecutor to seek injunctive relief, in addition to any other remedies available, for continued violations of the specified sections of the Labor Code.
• Require a court to award a prevailing plaintiff reasonable attorney's fees and costs, including expert witness fees.
• Make any agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration ineffective on the proceedings or on the authority of the public prosecutor, a division in the Department of Labor, or the Department of Justice to enforce the labor code. Clarifies that an individual agreement under this section shall not include a collective bargaining agreement.
• State that any subsequent appeal of the denial of any motion or other court filing to impose a restriction on representative action or to impose arbitration on a public prosecutor, a division of the department, or the Department of Justice shall not stay the trial court proceedings, subject to existing law.
• Authorize that the penalties for violations of the laws on classification of employees may be recovered by the employee as a statutory penalty, or by the Labor Commissioner as a civil penalty through the issuing of a citation or other specified procedures, and clarifies that the procedures for issuing, contesting, and enforcing judgements for citations by the Labor Commissioner relating to violations of the classification of employees laws shall be the same as those in section 1197.1 relating to violations of the minimum wage.
• Limit recovery by an employee to only the statutory penalty provided for in section 226.9, or the civil penalty through the Labor Code Private Attorneys General Act, but not both.
• Authorize enforcement by the Labor Commissioner in either a civil suit or existing administrative investigative procedures.

Related Legislation: SB 459 (Corbett, Chapter 706, Statutes of 2011), prohibits willful misclassification, as defined, of individuals as independent contractors. The bill also prohibits charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation, as specified, where those acts would have violated the law if the individuals had not been mischaracterized.

Staff Comments:

It is unknown how many additional actions would be brought as a result of the implementation of this bill.  However, it generally costs about $8,000 to operate a courtroom for one eight-hour day.  Although courts are not funded on the basis of workload, increased pressure on the trial courts and staff may create a need for increased funding for courts from the General Fund to perform existing duties. Numerous trial court operations are funded through the imposition and collection of criminal fines and fees. However, the Legislature has reduced and eliminated criminal fines and fees over the past decade. As a result, the 2023-24 budget includes an ongoing annual allocation of $105 million backfill from the General Fund in order to address declining revenue to the Trial Court Trust Fund. 

-- END --

SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2023-2024 Regular Session

Bill No: AB 594 (Author:Maienschein)

Version: May 18, 2023

Hearing Date: July 11, 2023

Fiscal: Yes

Urgency: No

Consultant: ID

SUBJECT

Labor Code: alternative enforcement

DIGEST

Clarifies and expands public prosecutors’ authority to prosecute civil and criminal actions for certain violations of the California labor code.

EXECUTIVE SUMMARY

Violations of California’s labor laws are a major issue throughout the state. Despite California’s strong labor laws that protect the rights and dignity of workers, enforcement of those laws through the current enforcement agency cannot meet the need for actions redressing wrongs and preventing further violations. In this context, violations of workers’ rights and theft of their wages continues unabated. To help address the need for enforcement, this bill clarifies and strengthens district attorneys’, city attorneys’, county counsels’, or any other city or county prosecutors’ authority to independently enforce California’s labor laws in their jurisdictions through prosecuting civil and criminal actions for violations of specified sections of the labor law in their jurisdictions. This bill clarifies who has this authority, that the authority is limited to the prosecutor’s geographic jurisdiction except for in specified circumstances, and makes other changes relating to enforcement of the labor laws.

AB 594 is sponsored by the California Labor Federation AFL-CIO, and is supported by a coalition of labor unions and employees’ associations representing employees throughout the state. It is opposed by a business coalition, including builders’ and contractors’ associations, the farm bureau, and the California Chamber of Commerce. This bill passed out of the Senate Committee on Labor, Public Employment and Retirement on a vote of 4 to 1.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Establishes the Department of Industrial Relations (DIR) in the Labor and Workforce Development Agency (LWDA), and vests it with authority to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. (Labor Code § 50.5.)
2. Establishes within the DIR various entities, including the Labor Commissioner (LC), the Division of Workers Compensation (DWC), and the California Division of Occupational Safety and Health. (Labor Code § 56.)
3. Authorizes the Labor Commissioner and their deputies and representatives, upon the filing of a claim by an employee, as specified, to, among other things, take assignments of and enforce the labor code related to:
   1. wage claims and incidental expense accounts and advances;
   2. mechanics’ and other liens of employees;
   3. claims based on “stop orders” for wages and on bonds for labor;
   4. claims for damages for misrepresentations of conditions of employment;
   5. claims for penalties for nonpayment of wages;
   6. claims for vacation, severance, or other supplemental compensation, as specified;
   7. claims for loss of wages as the result of discharge from employment for the garnishment of wages; and
   8. claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer’s premises. (Labor Code §§ 95-96.)
4. Specifies that nothing in the payment of wages provisions of the Labor Code limits the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the Labor Commissioner. (Labor Code § 218.)
5. Specifies certain requirements relating to an employee’s compensation, allowable hours of work, overtime work and pay, required rest breaks and days off, and guaranteed time off. (Labor Code §§ 200-2699.8.)
6. Prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee, and prohibits specified acts relating to the misclassified individual’s compensation. (Labor Code § 226.8.)
7. Provides that if the agency or a court issues a determination that a person or employer has engaged in any of the prohibited acts relating to employee classification, the person or employer shall be subject to a civil penalty of not less than five thousand dollars ($5,000) and not more than fifteen thousand dollars ($15,000) for each violation, in addition to any other penalties or fines permitted by law. (Labor Code § 226.8(b).)
8. Establishes a citation process for the Labor Commissioner to enforce violations of the minimum wage that includes, but is not limited to, issuing citations, make and notice findings as prescribed, requiring any amounts due after a hearing be due 45 days after notice of the finding, and taking all appropriate action to enforce the citation and recover a civil penalty assessed. (Labor Code § 1197 et seq.)

This bill:

1. Makes various findings and declarations regarding the pervasiveness of wage theft in California, its impact on local communities and the state at large, and the role of public enforcement agencies in curbing the practice.
2. Defines “public prosecutor” to mean a district attorney, a city attorney, a county counsel, or any other city or county prosecutor.
3. Authorizes a public prosecutor to prosecute an action, either civil or criminal, for a violation of Divisions One, Two or Three of the Labor Code or to enforce those sections independently and without specific direction of the Division of Labor Standards Enforcement, the Division of Workers’ Compensation, or the Division of Occupational Safety and Health, as applicable.
4. Limits the authority of a public prosecutor to enforcing violations occurring within the public prosecutor’s geographic jurisdiction, unless the public prosecutor is in a city with a population in excess of 750,000 or is otherwise authorized to enforce the Labor Code statewide.
5. Authorizes a public prosecutor to seek injunctive relief, in addition to any other remedies available, for continued violations of the specified sections of the Labor Code.
6. Requires a court to award a prevailing plaintiff reasonable attorney’s fees and costs, including expert witness fees.
7. Makes any agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration ineffective on the proceedings or on the authority of the public prosecutor, a division in the Department of Labor, or the Department of Justice to enforce the labor code. Clarifies that an individual agreement under this section shall not include a collective bargaining agreement.
8. States that any subsequent appeal of the denial of any motion or other court filing to impose a restriction on representative action or to impose arbitration on a public prosecutor, a division of the department, or the Department of Justice shall not stay the trial court proceedings, subject to existing law.
9. States that nothing in the article relating to wages shall limit the right of any wage violation claimant to sue directly or through an assignee for any wages or penalty due to them.
10. Authorizes that the penalties for violations of the laws on classification of employees may be recovered by the employee as a statutory penalty, or by the Labor Commissioner as a civil penalty through the issuing of a citation or other specified procedures, and clarifies that the procedures for issuing, contesting, and enforcing judgements for citations by the Labor Commissioner relating to violations of the classification of employees laws shall be the same as those in section 1197.1 relating to violations of the minimum wage.
11. Limits recovery by an employee to only the statutory penalty provided for in section 226.9, or the civil penalty through the Labor Code Private Attorneys General Act, but not both.
12. Authorizes enforcement by the Labor Commissioner in either a civil suit or existing administrative investigative procedures.

COMMENTS

1. California’s Labor Laws are only as good as their enforcement mechanisms

Over the years, California has enacted a variety of laws aimed at protecting employees in the state and ensuring they can be made whole when they are wronged by their employer. These laws ensure that California’s workforce is the strongest in the World and that their rights, fair treatment and pay, and dignity are respected.

However, laws are only as good as the extent to which they are enforced, and labor law violations continue to be a major problem across the state. Between 2017 and 2020, over $221 million in unpaid wages were recovered in actions by both the Department of Industrial Relations (DIR) and the Office of the Attorney General (AG).^[1] Such violations are often in the form of wage theft, when an employer steals from an employee’s wages by not paying for the full time worked or by not paying appropriate overtime. They also can occur through misclassification of workers, in which an employer incorrectly classifies an employee as an independent contractor. When an employer classifies an employee as an independent contractor, they can deny that employee the wage and hour, overtime, and other protections that classification as an employee provides. In addition, it allows employers to unlawfully charge employees for the tools required for their job. One study found that 90 percent of businesses inspected by the state were out of compliance with worker classification laws.^[2]

Despite these serious and pervasive violations of labor law, employees and the public have limited options to ensure compliance. The main public enforcement agency for the labor code is chronically backlogged with cases. The Labor Commissioner, the office that hears and adjudicates labor law violations, received 19,000 complaints in 2021 alone, and has been continually dealing with staffing and funding shortages.^[3] In light of those issues, cases typically take on average 505 days to be adjudicated. With such long processing times, many simply give up and withdraw their claims.

Non-enforcement causes serious harm. When an employer violates labor law, it places law-abiding employers at a disadvantage, and if violations are not enforced, it incentivizes a race to the bottom as employers try to compete with their competitors in the market. Moreover, those employees wronged by violations or who have their wages stolen lose thousands of dollars every year, hurting their pocketbooks and livelihoods. Thus, enforcement is essential to ensuring California’s strong labor laws actually protect workers and society from harm. AB 594 aims to increase enforcement of the labor laws by clarifying and strengthening the avenue through which public prosecutors can engage in enforcement.

1. AB 594 clarifies current law that public prosecutors can enforce certain provisions of the Labor Code

Currently, labor law specifies that nothing in the labor code limits the authority of district attorneys or a county or prosecuting attorney from prosecuting any actions for violations of the labor code. (Labor Code § 218.) However, beyond this provision, the current labor code is lacking direction for how and when district attorneys can enforce the labor laws. The author notes that many local district or city attorneys have expressed uncertainty over whether they do have authority to enforce labor laws. Therefore, AB 594 is not creating an entirely new opportunity for public enforcement, but rather clarifies public prosecutors’ authority to enforce labor laws, and expands and strengthens their ability to do so.

It does so by specifying that a public prosecutor may prosecute any action, either civil or criminal, for a violation of the first three divisions of the labor code. Those divisions relate to wages and hours rules, supervision and employment regulation, industry-specific laws, the obligations of employers, termination of employment, and employee misclassification. It states that a public prosecutor can do so independently and without specific direction of the Division of Labor Standards Enforcement, thereby clarifying that this authority is one that public prosecutors can exercise, and can do so on their own. AB 594 also clarifies who is considered a “public prosecutor” for the purposes of its sections, so that it is clear who can utilize the authority provided through the bill. It allows district attorneys, city attorneys, a county counsel, or any other city or county prosecutor to prosecute the labor code violations in their jurisdictions.

1. Public prosecutors will be limited to redressing violations occurring within their jurisdiction

AB 594 does not allow a public prosecutor to enforce any violation of the specified labor codes; rather, it specifies the scope of a public prosecutor’s power. It provides for authority over any claim arising from a violation within the prosecutor’s geographic jurisdiction, unless they are a prosecutor in a city of more than 750,000 people or are otherwise authorized to enforce the labor code statewide. Such a provision also makes sense. AB 594 is not providing a district attorney in Shasta the power to prosecute a labor violation that wholly occurred in Ventura, for example. But it would empower local prosecutors to enforce the labor laws in their jurisdictions, providing much-needed additional enforcement throughout the state.

1. AB 594 allows public prosecutors to recover for employees and prevent further labor law violations

AB 594 allows for the recovery of any remedies available in the labor code, as well as for injunctive relief. This means that public prosecutors will be able to recover as various labor codes allow for violations, as if the employee was bringing the suit themselves. By allowing for injunctive relief, AB 594 provides public prosecutors with the authority to prevent recurrent and future violations by the employer, thereby correcting a social wrong and enforcing compliance with the labor codes. As public prosecutors are public officers charged with protecting the interests and good of the people, it makes sense they would have the authority to request and obtain injunctions in such cases. While they would be acting on behalf of wronged employees in prosecutions under AB 594, they would also be fulfilling their public duties of representing the interests of the public in having the labor laws enforced, and therefore should have wide authority to prevent future wrongs of the same type.

1. That public prosecutors may have a personal incentive to prosecute labor cases is not a sufficient reason to decline additional enforcement

The bill also requires reasonable attorney’s fees and costs to be awarded to a prevailing plaintiff. By requiring attorney’s fees and costs, AB 594 ensures that public prosecutors will be able to take on such labor cases without concern that it will drain their department of its resources. With limited resources and a variety of other cases which public prosecutors are required to take, public prosecutors may be hesitant to wade into labor code violation prosecutions without the ability to offset some of their costs for prosecuting the case. Thus, contrary to the arguments made by the opposition, including a provision allowing for reasonable attorney’s fees and costs is a necessary part of ensuring that public prosecutors will be able to take on labor cases under AB 594. Requiring the court to award prevailing plaintiff attorney’s fees and costs would not be a boon for public prosecutors or their offices; they still need to manage their other caseloads, manage and train staff, and conserve their resources. Requiring for reasonable attorney’s fees and costs will simply lessen the strain that taking on labor law prosecutions would otherwise place on their limited resources. The purpose of the bill is to encourage public prosecutors to prosecute cases where employers are violating worker rights. In order to be awarded attorney’s fees and costs, the public prosecutor has to prevail. This means that the court found that the employer engaged in wrong doing, such as stealing worker wages or denying workers rest. Regardless of whatever aspirations may be possible to make about the motivations of public prosecutors in response to AB 594, it cannot be denied the result of public prosecutors taking on labor code violations is that the codes will be more enforced.

One concern that has been raised regarding this bill is the risk that, because public prosecutors regularly contract out cases for a variety of reasons, there could arise an issue of pay-to-play. A pay-to-play issue could arise where a bad-actor public prosecutor contracts out cases to a private attorney who contributes to the public prosecutor’s campaign. This issue has been brought to light recently by the scandals of Tom Girardi. However, this issue appears to be resolved since the Levine Act (Government Code section 84308) was amended by AB 1439 (Glazer, Ch. 848, Stats. 2022) in 2022 to extend to local government agencies. The Levine Act prohibits an officer from accepting or soliciting campaign contributions from a party or participant who has a financial interest in a proceeding pending or recently decided before the agency. Public prosecutors under this bill would fall under the limits of the Levine Act, such that they are similarly limited from contracting out cases under the cause of actions created by AB 594 to individuals who contribute to their campaigns.

1. AB 594 ensures that the labor laws can be enforced even when employers try to foreclose individual employees from doing so

As labor code violations are an issue of the public good, AB 594 also allows a public prosecutor, Attorney General, or Labor Commissioner to enforce violations on behalf of a worker even if that worker has entered into an agreement with their employer mandating disputes be resolved through private arbitration. A 2018 study by the Economic Policy Institute found that approximately 56% of private-sector, non-union employees were subjected to mandatory arbitration agreements.^[4] Thus, if public prosecutors were barred from prosecuting labor violations by these mandatory arbitration agreements, agreements that they did not sign or could be considered a party to, it could effectively preclude a large percentage of the cases otherwise triable by the public prosecutor. Moreover, it would offend traditional notions of fairness to insist that the actions of the employer and employee could bind a public prosecutor. The public prosecutor must be allowed to enforce the law, not just for the wronged employee, but also for the public interest of enforcing the labor code. AB 594 ensures such enforcement can take place by making clear that such mandatory arbitration clauses will not preclude prosecution by the public prosecutor, the Labor Commissioner, or the Attorney General.

1. AB 594 will help deter employee misclassification

One of the common ways in which California’s labor laws are violated is through employee misclassification. As previously mentioned, misclassification is a serious and pervasive problem in California.

AB 594 allows that, when a misclassification has occurred for which the labor code’s statutory penalties as set forth in section 226.8 apply, those penalties may either be recovered by the employee as a statutory penalty or by the Labor Commissioner as a civil penalty pursuant to the authority already given the Commissioner to do this. By specifying both avenues, AB 594 allows employees to enforce the labor codes on misclassification and recover the statutory penalties when they or a public prosecutor through this bill does so. Allowing this will help deter and punish misclassification by ensuring the provisions designed to do so can be enforced both by the Labor Commissioner and by the employee or public prosecutor.

1. Employees will be allowed to recover through this statute or through PAGA, but not both

Opposition has claimed that AB 594 could allow for an employee to “double-dip” on recovery for the labor violations they suffered because a public prosecutor could pursue a claim on their behalf through AB 594’s process and the employee could also pursue a claim separately through Section 2699 (the Private Attorneys’ General Act). To address the opposition’s stated concern, AB 594 now includes a provision expressly stating that an employee is only entitled to recover one or the other for one misclassification violation.

1. AB 594 will result in more enforcement, not inconsistent enforcement

Opposition has also attempted to argue that AB 594 will result in inconsistent enforcement across the state. Yet this is already the current landscape for labor law enforcement. This is because section 218 already provides city attorneys with authority to enforce the labor laws, yet only some are actually utilizing this authority amid the ambiguity and lack of clarity over the breadth of that authority. AB 594 is only creating more consistency by clarifying this authority and enabling public prosecutors to utilize it. Moreover, nothing in the exercise of that authority necessarily prevents public prosecutors from collaborating or coordinating on cases with other jurisdictions or the statewide agencies when individual cases across the state involve the same bad actor. When the alternative to potential “inconsistent” enforcement is simply insufficient enforcement, the inconsistent enforcement is certainly the preferable option. Enforcement of the laws is a necessary and vital part to the effectiveness of the laws themselves, and AB 594 is a useful step toward ensuring California’s labor laws can be enforced.

SUPPORT

California Labor Federation, AFL-CIO (sponsor)

California-Nevada Conference of Operating Engineers

California State Legislative Board of Sheet Metal, Air, Rail and Transportation Workers – Transportation Division (SMART-TD)

California School Employees Association

OPPOSITION

California Chamber of Commerce

Acclamation Insurance Management Services (AIMS)

Allied Managed Care (AMC)

Associated Builders and Contractors of California

Associated General Contractors of California

Associated General Contractors San Diego

California Association for Health Services at Home

California Association of Joint Power Authorities (CAJPA)

California Association of Sheet Metal and Air Conditioning Contractors National Association

California Association of Winegrape Growers

California Attractions and Parks Association

California Bankers Association (CBA)

California Building Industry Association (CBIA)

California Business Roundtable (CBRT)

California Farm Bureau

California League of Food Producers

California Manufactures & Technology Association (CMTA)

California New Car Dealers Association

California Restaurant Association

California Retailers Association

California Trucking Association

Coalition of Small and Disabled Veteran Businesses

Construction Employers’ Association

Family Business Association of California

Flasher Barricade Association (FBA)

National Federation for Independent Business (NFIB)

Western Growers Association

RELATED LEGISLATION

Pending Legislation: None known.

Prior Legislation:

SB 459 (Corbett, Ch. 706, Stats. 2011) prohibits willful misclassification, as defined, of individuals as independent contractors. The bill also prohibits charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation, as specified, where those acts would have violated the law if the individuals had not been mischaracterized.

SB 796 (Dunn, Ch. 906, Stats. 2004) created the Labor Code Private Attorneys General Act of 2004, providing that an employee may bring a civil action on behalf of themselves and other employees who were subjected to a violation of the labor code by their employer, instead of pursuing their claim through the enforcement agency.

PRIOR VOTES:

Assembly Floor (Ayes 52, Noes 17)

Assembly Appropriations Committee (Ayes 11, Noes 4)

Assembly Judiciary Committee (Ayes 8, Noes 3)

Assembly Labor and Employment Committee (Ayes 5, Noes 2)

**************

1. (Ilhna Mangundayao et al, “More than 3 billion in stolen wages recovered for workers between 2017 and 2020” Economic Policy Institute 7 (Dec. 22, 2021), available at https://files.epi.org/uploads/240542.pdf. ↑

2. Policy Brief: Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries, National Employment Law Project, 3 (Oct. 2020). ↑

3. Jeanne Kuang, “Agency battling wage theft in California is too short-staffed to do its job,” CalMatters (Oct. 17, 2022), available at https://calmatters.org/california-divide/2022/10/agency-battling-wage-theft/?series=unpaid-wages-california-workers. ↑

4. Alexander J.S. Colbin, “The growing use of mandatory arbitration: Access to the courts is now barred for more than 60 million American workers,” Economic Policy Institute (April 6, 2018), available at https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/. ↑

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Dave Cortese, Chair

2023 - 2024 Regular

Bill No: AB 594 Hearing Date: June 28, 2023

SUBJECT: Labor Code: alternative enforcement

KEY ISSUES

Should the Legislature help address wage claim backlogs by expanding and strengthening the right of public prosecutors to enforce labor laws and aide the collection of owed wages and enforce other labor law violations?

Should the Legislature expand the rights of public prosecutors to enforce labor law – including by giving them the ability to seek injunctive relief, enforcing laws dealing with misclassification of employees and specifying that public prosecutors are not subject to arbitration agreements when enforcing labor laws?

ANALYSIS

Existing law:

1. Requires, under the California Occupational Safety and Health Act, an employer to:
   1. Furnish employment and a place of employment that is safe and healthful.
   2. Furnish and use safety devices and safeguards, and to adopt and use practices, means, methods, operations, and processes, which are reasonably adequate to render employment and the place of employment safe and healthful.
   3. Do everything reasonably necessary to protect the life, safety, and health of employees. (Labor Code § 6300 et seq.)
2. Establishes the Department of Industrial Relations (DIR) in the Labor and Workforce Development Agency (LWDA), and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. (Labor Code §50.5)
3. Establishes within the DIR, various entities including the Division of Labor Standards Enforcement (DLSE) under the direction of the Labor Commissioner (LC), and empowers the LC with ensuring a just day’s pay in every workplace and promotes economic justice through robust enforcement of labor laws. (Labor Code §79-107)
4. Requires the LC and authorized deputies and representatives, upon the filing of a claim by an employee, as specified, to, among other things, take assignments of:
   1. Wage claims and incidental expense accounts and advances.
   2. Mechanics’ and other liens of employees.
   3. Claims based on “stop orders” for wages and on bonds for labor.
   4. Claims for damages for misrepresentations of conditions of employment.
   5. Claims for penalties for nonpayment of wages.
   6. Claims for vacation, severance, or other supplemental compensation, as specified.
   7. Claims for loss of wages from discharge from employment for the garnishment of wages.
   8. Claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer’s premises. (Labor Code §96)
5. Provides that nothing in the payment of wages provisions of the labor code limit the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the LC. (Labor Code §218)
6. Prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individual’s compensation. (Labor Code §226.8)
7. Provides that if the LWDA or a court issues a determination that a person or employer has engaged in any of the acts of misclassification of employees per the above, the person or employer shall be subject to a civil penalty of not less than five thousand dollars ($5,000) and not more than fifteen thousand dollars ($15,000) for each violation, in addition to any other penalties or fines permitted by law. (Labor Code §226.8)
8. Establishes a citation process for the LC to enforce violations of the minimum wage that includes, but is not limited to, the following procedural requirements:
   1. A citation issued to an employer must be in writing and shall describe the nature of the violation, including reference to the statutory provision alleged to have been violated, if contract wages are unpaid, or both.
   2. The LC shall promptly take all appropriate action to enforce the citation and to recover the civil penalty assessed, wages, liquidated damages, and any applicable penalties, as specified.
   3. To contest a citation, a person shall within 15 business days after service of the citation, notify the office of the LC that appears on the citation of their appeal by a request for an informal hearing. The LC or their deputy or agent shall, within 30 days, hold a hearing.
   4. The decision of the LC shall consist of a notice of findings, findings, and an order, all of which shall be served on all parties to the hearing within 15 days after the hearing by regular first-class mail.
   5. Any amount found due by the LC as a result of a hearing shall become due and payable 45 days after notice of the findings, written findings, and order have been mailed to the party assessed. A writ of mandate may be taken from this finding to the appropriate superior court.
   6. As a condition to filing a petition for a writ of mandate, the petitioner seeking the writ shall first post a bond with the LC equal to the total amount of any minimum wages, contract wages, liquidated damages, and overtime compensation that are due and owing, as specified.
   7. A person to whom a citation has been issued shall, in lieu of contesting a citation pursuant to this section, transmit to the office of the LC designated on the citation the amount specified for the violation within 15 business days after issuance of the citation. (Labor Code §1197.1 et seq.)

This bill:

1. Makes various findings and declarations regarding the pervasiveness of wage theft in California, its impact on local communities and the state at large, and the role of public enforcement agencies in curbing the practice.
2. Defines “public prosecutor” to mean a district attorney, a city attorney, a county counsel, or any other city or county prosecutor.
3. Authorizes a public prosecutor to prosecute an action, either civil or criminal, for a violation of Divisions 1, 2 or 3 of the Labor Code or to enforce those sections independently and without specific direction of the Division of Labor Standards Enforcement.
   1. Division 1 covers much of the administrative implementation for DIR.
   2. Division 2 covers employment regulation and supervision, including wages, hours and industry specific provisions.
   3. Division 3 covers employment relations – employee definitions and obligations on employers, as well as termination provisions.
4. Limits the authority of a public prosecutor under these provisions to redressing violations occurring within the public prosecutor’s geographic jurisdiction, unless the public prosecutor is in a city with a population in excess of 750,000 or is otherwise authorized to enforce this code statewide.
5. Authorizes a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations of the Labor Code.
6. Requires a court to award a prevailing plaintiff in that action its reasonable attorney’s fees and costs, including expert witness fees.
7. Provides that in any action initiated by a public prosecutor, a division in the department, or the Department of Justice to enforce the Labor Code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect, as specified.
   1. Provides that any subsequent appeal of the denial of any motion or other court filing to impose such restrictions shall not stay the trial court proceedings, notwithstanding Section 916 of the Code of Civil Procedure.
   2. Provides that an individual agreement does not include a collective bargaining agreement.
8. Authorizes, in an action for willful misclassification of employees, the recovery of penalties by the employee as a statutory penalty or by the LC as a civil penalty through the issuance of a citation. The procedures for issuing, contesting, and enforcing judgments for citations under these provisions shall be the same as provided in Labor Code Section 1197.1.
9. Specifies that an employee is entitled to only one of the following (not both) for the same violation of willful misclassification, per the above:
   1. To recover the statutory penalty as provided for in this bill; or
   2. To enforce a civil penalty pursuant to the Private Attorneys General Act.

COMMENTS

1. Background: Wage Theft and Worker Misclassification

California leads the nation with some of the strongest workplace protections for workers. Unfortunately, those laws are meaningless if they are not implemented or enforced, leaving workers struggling to recoup owed wages. Wage theft in California, which impacts low-wage workers disproportionately, is well documented. Wage theft captures many labor law violations including violations of the minimum wage, overtime, denied meal periods or misclassification of employees as independent contractors, among others. A 2022 report to the Legislature on the state’s wage claim adjudication process reveals that there were nearly 19,000 wage claims filed in 2021 with a total of $335 million being owed to workers.^[1] Due to challenges in staffing, resources, and a growing case backlog, only approximately $40 million has been in paid in awards or settlements through the wage claim adjudication unit of the LC.^[2] In 2022, the Labor Commissioner’s office recovered through the wage claim process an average of 63% of wages owed, totaling more than $47 million paid to workers.

As noted in the Assembly Judiciary Committee analysis of this bill, “According to the Economic Policy Institute, between 2017 – 2020, between the Department of Industrial Relations (DIR) and the Office of the Attorney General, California recovered over $221 million in unpaid wages. Wage theft often occurs as a side effect of worker misclassification, which refers to the practice of employers identifying their workers as a category other than full-time or part-time employees, such as “independent contractors.” A recent study from the National Employment Law Project found that between 2017 – 2018, 90% of businesses inspected by a state agency were found to be out of compliance with worker classification laws, resulting in $7.8 million assessed in lost wages.”

Wage theft and practices like misclassification do not only affect workers, but they also create unfair competition for responsible employers who follow the law. The State of California is also harmed when labor laws are not enforced because more workers fall into poverty, the safety net is eroded, and payroll taxes are not paid.

2. DLSE Understaffed = Wage Claim Backlogs

Created in 1976, the Berman wage claim process was created to informally resolve wage disputes, primarily of minimum wage violations. Over the years, this process has expanded to include additional laws that can be adjudicated through the wage claim process, as well as various employee employer relationships (misclassification) and liabilities. As part of this expansion, the Legislature has also designed recovery tools that require more time and resources to process. This expansion, combined with population growth that has not kept pace with staffing levels at the Department of Industrial Relations has led to wage claim backlogs that have left workers waiting months or even years for any recovery of wages. While current law requires wage claims to be heard within 120 days, absent a settlement agreement, and a decision issued within 15 days, the average wait time for a wage claim in 2021 was 335 days.^[3]

As noted by the author, “there are numerous barriers to enforcement even if agencies were well-funded, but instead these agencies are underfunded and have a high rate of vacancies. The Labor Commissioner is not unique in facing vacancies. The entire public sector has seen a wave of retirements, has failed to pay competitive wages, and has struggled to recruit and retain workers. These vacancies are more important only because the work of this office is so essential, and understaffing has increased the workload on existing staff.”

The Labor Commissioner is actively addressing the backlog by prioritizing claims and streamlining workflow to reduce delays and improve outcomes, while simultaneously working on building staff capacity. Unfortunately, as labor laws have evolved, so have some employer work models and creativity to evade them making enforcement more time-intensive and making it harder for workers to recover owed wages.

This bill:

Existing law already grants district attorneys of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations of the payment of wages. This bill tries to address the wage claim backlog and understaffing issue by expanding and strengthening the right of public prosecutors to enforce labor laws to aide in the collection of owed wages. This bill authorizes a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations of the Labor Code.

Additionally, this bill also ensures that a public prosecutor is able to enforce violations on behalf of workers even if that worker has entered into an agreement with their employer mandating disputes to be resolved through private arbitration. As noted by the Assembly Judiciary Committee analysis of this bill:

“Arbitration agreements effectively prevent employees from bringing claims in court either independently, or as a class. According to a 2018 study by the Economic Policy Institute, approximately 56% of private-sector nonunion employees were subject to mandatory arbitration, and 30% of employers included class action waivers. (Alexander J.S. Colbin, The growing use of mandatory arbitration: Access to the courts is now barred for more than 60 million American workers (Economic Policy Institute) April 6, 2018, available here: https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/.) Also in 2018, the United States Supreme Court upheld the validity of forced arbitration agreements and class waivers in Epic Systems Corp. v. Lewis (128 S. Ct. 161 1612 (2018).) In light of the existing dominance of arbitration agreements and the Epic Systems decision, the Center for Popular Democracy and the Economic Policy Institute estimate that by 2024, more than 80% of nonunion private-sector workers will be covered by arbitration agreements. (Hamaji et. al., Unchecked corporate power: Forced arbitration, the enforcement crisis, and how workers are fighting back, Economic Policy Institute (May 20, 2019) at https://www.epi.org/publication/unchecked-corporate-power/.) As such, ensuring that public prosecutors are not barred from civil action against employers by way of a likely private arbitration clause is an important element of this bill’s effort to expand public enforcement capacity.”

3. Need for this bill?

According to the author, “The current system of labor law enforcement is inadequate to meet the needs of California’s immense workforce. As a result, companies that violate labor laws are unlikely to get caught. This creates a race to the bottom where employers cut costs on the backs of workers. Law-abiding employers are put at a competitive disadvantage for resisting the business model of labor law violation. California must do better in protecting workers’ rights and holding abusive companies accountable. This bill provides new tools to public enforcement agencies to cite violators, win injunctive relief and provide timely justice to workers.”

4. Proponent Arguments:

According to the sponsors of the measure, the California Labor Federation, “Despite the best efforts of the Labor Commissioner and local agencies, enforcement of labor law violations is inadequate to meet the needs of California’s immense workforce. This state is home to 19 million workers, many of whom work in industries known to have high rates of labor law violations. There are numerous barriers to enforcement even if agencies were well-funded, but instead, these agencies are underfunded and understaffed. Companies continue to develop more sophisticated ways to evade the law, including complex layers of contracting, the use of fictitious LLC and franchise agreements, app-based dispatch, and the widespread use of mandatory arbitration as a condition of employment. These practices make enforcement more time-intensive, limit workers’ ability to prove their claims, and prevent enforcement agencies from holding the responsible party liable.”

Furthermore, they argue, “Companies that violate labor laws are unlikely to get caught and they know it. This creates a race to the bottom where employers cut costs on the backs of workers. It is essential that we maximize the tools available to public enforcement agencies to give workers access to justice, hold companies that break the law accountable, and secure our state safety net.

AB 594 will expand enforcement options for workers and strengthen the tools available to enforcement agencies to combat widespread wage theft and other labor law violations. It expands the ability of local enforcement agencies to enforce labor laws and seek injunctive relief, it simplifies the citation process for the Labor Commissioner to address misclassification, and it clarifies that public agencies are not subject to arbitration agreements when enforcing labor laws to stop illegal practices.”

5. Opponent Arguments:

A coalition of employers, including the California Chamber of Commerce, are opposed to the measure arguing that it will lead to inconsistent enforcement and allows for private attorney contracting. They argue, “Providing this broad of authority to an array of local officials raises concerns regarding inconsistency in enforcement of the law. As raised in connection with prior and pending legislation regarding local enforcement of statewide laws, different cities and counties are likely to have significantly different enforcement. The cases they choose, their proffered interpretations of the law, the quality of investigation and prosecution, and whether they have the resources to prosecute is likely to vary significantly. Our concern is further exacerbated by language in the bill that allows some local prosecutors to prosecute across the state and forbids others from doing so. Efforts to bolster enforcement should be focused on improving DLSE statewide enforcement rather than side-stepping that issue by deputizing local city and county officials.”

Furthermore, they argue that, “AB 594 has no prohibition on local entities contracting with private attorneys for enforcement. Currently, local prosecutors across the state contract out their enforcement authority to private attorneys for various reasons. The bill’s attorney’s fees provision also raises concerns regarding motivation. Because of the significant cost of litigating Labor Code claims, the vast majority of employers are likely to settle the case like they do now with private attorneys. Public prosecutors will have been spending significant taxpayer dollars to litigate the case (unlikely the DLSE, which is funded by employers’ annual assessments). There are concerns then about the motivation to increase settlement values to compensate for that and to add to the city or county’s own budget, an issue that does not exist regarding DLSE enforcement. If local prosecutors contract with private attorneys, there is further concern about financial motivation in these cases.”

6. Staff Comments:

Arguments by the opposition include concerns that “providing this broad of authority to an array of local officials raises concerns regarding inconsistency in enforcement of the law. As raised in connection with prior and pending legislation regarding local enforcement of statewide laws, different cities and counties are likely to have significantly different enforcement.” They argue that efforts to bolster enforcement should be focused on improving DLSE statewide enforcement rather than side-stepping that issue by deputizing local city and county officials. Unfortunately, as previously documented in this analysis, improving enforcement at the DLSE is not as straightforward and not likely to be improved as quickly as workers need.

Existing law already allows public prosecutors to enforce some provisions of the labor code (claims for the payment of wages); this bill expands and strengthens this authority. This authority was established by legislation over eighty years ago and committee staff has been unable to identify data or examples where the law was enforced differently in one jurisdiction versus another. As noted by the Assembly Judiciary Committee analysis of this bill, “Finally, it is arguable that in light of the severe lack of enforcement, which bad actors ultimately benefit from, even inconsistent enforcement is better than none at all.”

This bill does propose to expand public prosecution to a wide array of labor and employment laws, should this bill move forward, the author may wish to explore the need or benefits to requiring the Department of Industrial Relations, through DLSE, to issue guidance on labor law enforcement to public prosecutors to aide in providing some uniformity in enforcement across the state. Committee staff notes that nothing precludes DIR from providing such guidance absent a direct mandate for it in this bill.

7. Double Referral:

This bill has been double referred and if approved by this Committee today, will be sent to Senate Judiciary Committee for a hearing.

8. Prior Legislation:

SB 459 (Corbett, Chapter 706, Statutes of 2011), prohibits willful misclassification, as defined, of individuals as independent contractors. The bill also prohibits charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation, as specified, where those acts would have violated the law if the individuals had not been mischaracterized.

SUPPORT

California Labor Federation (Sponsor)
Alameda Labor Council
American Federation of State, County and Municipal Employees (AFSCME)
California Conference Board of The Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
California Federation of Teachers
California Nurses Association
California Rural Legal Assistance Foundation, INC.
California School Employees Association
California State Council of Service Employees International Union (SEIU California)
California State Legislative Board, Sheet Metal, Air, Rail and Transportation Workers –

Transportation Division (SMART-TD)
California Teamsters Public Affairs Council
Central Coast Labor Council
Consumer Attorneys of California
Contra Costa Central Labor Council
Council of Community Housing Organizations
Elevator Constructors Local 8
Engineers and Scientists of California, IFPTE Local 20
International Union of Operating Engineers, Cal-Nevada Conference
Los Angeles County Federation of Labor, AFL-CIO
North Bay Labor Council
Renaissance Entrepreneurship Center
Sacramento Central Labor Council, AFL-CIO
San Diego City Attorney's Office
San Francisco City Attorney's Office
TechEquity Collaborative
UFCW - Western States Council
UNITE HERE, AFL-CIO
Utility Workers Union of America

OPPOSITION

Acclamation Insurance Management Services
Allied Managed Care
Associated Builders and Contractors of California
Associated General Contractors of California
Associated General Contractors San Diego Chapter
California Association for Health Services At Home
California Association of Joint Powers Authorities
California Association of Sheet Metal & Air Conditioning Contractors National Association
California Association of Winegrape Growers
California Attractions and Parks Association
California Bankers Association
California Building Industry Association
California Business Roundtable
California Chamber of Commerce
California Coalition on Workers Compensation
California Farm Bureau
California League of Food Producers
California Manufactures & Technology Association
California New Car Dealers Association
California Restaurant Association
California Retailers Association
California Trucking Association
Coalition of Small and Disabled Veteran Businesses
Construction Employers' Association
Family Business Association of California
Flasher Barricade Association
National Federation of Independent Business
Western Growers Association

-- END --

1. Wage Claims Adjudication Unit Annual Report Pursuant to Labor Code Section 96.1, Calendar Year 2021, California Labor Commissioner’s Office, p. 15. ↑

2. Ibid. ↑

3. Jeanne Kuang and Alejandro Lazo, Wage theft whack-a-mole: California workers win judgments against bosses but still don’t get paid, CalMatters (September 28, 2022) available at https://calmatters.org/california-divide/2022/09/california-wage-theft-cases/. ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 594

Author:(Maienschein)

As Amended Ver:May 18, 2023

Majority vote

SUMMARY

Authorizes public prosecutors to sue for certain violations of the Labor Code without specific authorization from the Division of Labor Standards Enforcement (DLSE) and nullifies any agreements that limit an employee's right to file in court on behalf of themselves or in a representative action. Permits, in an action for willful misclassification, the recovery of penalties by the employee as a statutory penalty or by the Labor Commissioner (LC) as a civil penalty.

Major Provisions

1. Defines "public prosecutor' to mean a district attorney, a city attorney, a county counsel, or any other city or county prosecutor.
2. Expands the authorization for public prosecutors to prosecute payment of wages' violations to include prosecuting an action, either civil or criminal, for additional violations of the Labor Code or to enforce the provisions of the code independently and without the specific direction of the DLSE. This prosecution is limited to those violations occurring within the public prosecutor's geographic jurisdiction, except as specified.
3. Authorizes a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations of the Labor Code.
4. Requires a court in an action brought under 2), above, to award a prevailing plaintiff its reasonable attorney's fees and costs, including expert witness fees.
5. Provides that in an action initiated by a public prosecutor, a division in the department, or the Department of Justice to enforce this code, any individual agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect, as specified. Any subsequent appeal of the denial of any motion or other court filing to impose such restrictions shall not stay the trial court proceedings, notwithstanding authorization to perfect an appeal.
6. Authorizes, in an action for willful misclassification, the recovery of penalties by the employee as a statutory penalty or by the LC as a civil penalty through the issuance of a citation. The procedures for issuing, contesting, and enforcing judgments for citations under this section shall be the same as provided in Labor Code Section 1197.1.
7. States that an employee is entitled to only one of the following for the same violation in 6), above:
   1. To recover a statutory penalty provided for in this section.
   2. To enforce a civil penalty pursuant to the Private Attorneys General Act.

COMMENTS

The extent of worker misclassification cannot be underscored. A 2000 study commissioned by the United States Department of Labor found that nationally between 10% and 30% of audited employers misclassified workers.^[1] As our workplaces and the nature of the employee-employer relationship evolves, new opportunities for misclassification have emerged. In 2017, California's Employment Development Department Tax Audit Program conducted 7,937 audits and investigations, resulting in assessments totaling $249,981,712, and identified nearly half a million unreported employees.^[2] Recent research also supports the prevalence of misclassification and finds some of the highest misclassification rates in the economy's growth industries, including home care, janitorial, trucking, construction, hospitality, security, and the app-based "on demand" sector.^[3]

Wage theft in California, which impacts low-wage workers disproportionately, is well documented. A 2022 report to the Legislature on the state's wage claim adjudication process reveals that there were nearly 19,000 wage claims filed in 2021 with a total of $335 million being owed to workers.^[4] Due to challenges in staffing, resources, and a growing case backlog, only approximately $40 million has been in paid in awards or settlements through the wage claim adjudication unit of the DLSE.^[5]

Committee comments

While the opposition argues that the bill gives broad authority to local prosecutors to prosecute claims under the Labor Code, recent amendments to the bill narrow the scope of their authority to violations of Division 2 and 3 of the code, which primarily deal with wage and hour and employee classification provisions.

According to the Author

"The current system of labor law enforcement is inadequate to meet the needs of California's immense workforce. As a result, companies that violate labor laws are unlikely to get caught. This creates a race to the bottom where employers cut costs on the backs of workers. Law-abiding employers are put at a competitive disadvantage for resisting the business model of labor law violation.

California must do better in protecting workers' rights and holding abusive companies accountable. This bill provides new tools to public enforcement agencies to cite violators, win injunctive relief and provide timely justice to workers."

Arguments in Support

The California Labor Federation, sponsor of the bill, states, "Despite the best efforts of the Labor Commissioner and local agencies, enforcement of labor law violations is inadequate to meet the needs of California's immense workforce. This state is home to 19 million workers, many of whom work in industries known to have high rates of labor law violations. There are numerous barriers to enforcement even if agencies were well-funded, but instead, these agencies are underfunded and understaffed.

Companies continue to develop more sophisticated ways to evade the law, including complex layers of contracting, the use of fictitious LLC and franchise agreements, app-based dispatch, and the widespread use of mandatory arbitration as a condition of employment. These practices make enforcement more time-intensive, limit workers' ability to prove their claims, and prevent enforcement agencies from holding the responsible party liable.

In addition, the failure to enact immigration reform has left millions of immigrant workers trapped in jobs where their rights are violated, and employers use immigration threats to prevent them from reporting. These conditions require enforcement agencies to be proactive, strategic and culturally competent to provide outreach, education, and assistance. New tools like deferred action for workers in labor disputes offer some hope but only if enforcement agencies have the resources to utilize them."

Arguments in Opposition

The California Chamber of Commerce and others argue, "While we appreciate and support the efforts to increase state enforcement of labor laws, public prosecutors are already permitted under Labor Code section 218 to prosecute a number of wage and hour violations. Intentionally withholding wages is also already a crime for which employers can be prosecuted in a criminal action…

Providing this broad of authority to an array of local officials raises concerns regarding inconsistency in enforcement of the law. As raised in connection with prior legislation regarding local enforcement of statewide laws, different cities and counties are likely to have significantly different enforcement. The cases they choose, their proffered interpretations of the law, the quality of investigation and prosecution, and whether they have the resources to prosecute is likely to vary significantly. Efforts to bolster enforcement should be focused on improving DLSE statewide enforcement rather than side-stepping that issue by deputizing local city and county officials."

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. Annual costs of an unknown, but likely significant amount, potentially in excess of $150,000, to the LC to pursue penalties for violations of misclassification laws while adjudicating existing wage claims (special fund).
2. Annual General Fund (GF) or Trial Court Trust Fund (TCTF) cost pressures of an unknown, but likely significant, amount to the courts in additional workload, by authorizing another entity (public prosecutors) to enforce labor law violations in court and authorizing the LC to enforce misclassification penalties through a civil suit. It is unclear how many additional actions may be filed statewide because of this bill, but the estimated workload cost of one hour of court time is $1,000. If 10 cases are filed statewide resulting in 20 hours of court time for each case, costs would be approximately $200,000. Although courts are not funded on the basis of workload, increased pressure on staff and the TCTF may create a need for increased court funding from the GF to perform existing duties. The Governor's 2023-24 state budget already proposes $109.3 million in ongoing GF revenue to continue backfilling the TCTF for expected revenue declines.
3. However, to the extent authorizing public prosecutors to enforce existing labor laws reduces the backlog of claims pending with the LC, this bill may reduce cost pressures to fund additional administrative enforcement efforts. The Governor's 2023-24 state budget proposes an additional $11.7 million one-time special funds and $6.5 ongoing special funds for DIR to help address wage claim processing times.

VOTES

ASM LABOR AND EMPLOYMENT: 5-2-0

YES: Kalra, Haney, Ortega, Reyes, Ward

NO: Flora, Chen

ASM JUDICIARY: 8-3-0

YES: Maienschein, Connolly, Haney, Kalra, Pacheco, Papan, Reyes, Robert Rivas

NO: Essayli, Dixon, Sanchez

ASM APPROPRIATIONS: 11-4-1

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

NO: Megan Dahle, Dixon, Mathis, Sanchez

ABS, ABST OR NV: Robert Rivas

UPDATED

VERSION: May 18, 2023

CONSULTANT: Megan Lane / L. & E. / (916) 319-2091 FN: 0000575

1. See the National Employment Law Project's (NELP) Fact Sheet "Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries," https://www.nelp.org/publication/independent-contractor-misclassification-imposes-huge-costs-on-workers-and-federal-and-state-treasuries-update-2017/. ↑

2. Employment Development Department 2018 Annual Report on Fraud Deterrence and Detection Activities, https://edd.ca.gov/About_EDD/pdf/Fraud_Deterrence_and_Detection_Activities_2018.pdf. ↑

3. See NELP's Fact Sheet in footnote 1. ↑

4. Wage Claims Adjudication Unit Annual Report Pursuant to Labor Code Section 96.1, Calendar Year 2021, California Labor Commissioner's Office, p. 15. ↑

5. Ibid. ↑

Date of Hearing: May 10, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 594

Author:(Maienschein) – As Amended Ver:April 13, 2023

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

SUMMARY:

This bill authorizes a public prosecutor to enforce or bring a civil or criminal action for violation of specified labor laws, without specific direction under the applicable statute.

Specifically, this bill:

1. Authorizes a public prosecutor, meaning a district attorney, city attorney, county counsel, or another city or county prosecutor, to enforce Division 1 (administrative functions of the Department of Industrial Relations (DIR)), Division 2 (Employment Regulation and Supervision, including compensation, working hours, and industry-specific laws), and Division 3 (Employment Relations, including defining an employee, the obligations of employers, and termination statutes) of the Labor Code independently, without specific direction from the applicable DIR division.
2. Authorizes a public prosecutor to seek injunctive relief, in addition to any other remedies available, to prevent continued labor violations and requires the court to award a prevailing plaintiff reasonable attorney’s fees and costs.
3. Provides that an agreement between a worker and employer that purports to limit representative actions or mandate private arbitration has no effect on the authority of the public prosecutor to enforce the law.
4. Authorizes the Labor Commissioner (LC) to issue a determination on behalf of a worker that the employer has violated misclassification laws, thus allowing recovery of a civil penalty through issuance of a citation, enforced pursuant to existing administrative investigative procedures or a civil suit.

FISCAL EFFECT:

1. Annual costs of an unknown, but likely significant amount, potentially in excess of $150,000, to the LC to pursue penalties for violations of misclassification laws while adjudicating existing wage claims (special fund).
2. Annual General Fund (GF) or Trial Court Trust Fund (TCTF) cost pressures of an unknown, but likely significant, amount to the courts in additional workload, by authorizing another entity (public prosecutors) to enforce labor law violations in court and authorizing the LC to enforce misclassification penalties through a civil suit. It is unclear how many additional actions may be filed statewide because of this bill, but the estimated workload cost of one hour of court time is $1,000. If 10 cases are filed statewide resulting in 20 hours of court time for each case, costs would be approximately $200,000. Although courts are not funded on the basis of workload, increased pressure on staff and the TCTF may create a need for increased court funding from the GF to perform existing duties. The Governor’s 2023-24 state budget already proposes $109.3 million in ongoing GF revenue to continue backfilling the TCTF for expected revenue declines.

However, to the extent authorizing public prosecutors to enforce existing labor laws reduces the backlog of claims pending with the LC, this bill may reduce cost pressures to fund additional administrative enforcement efforts. The Governor’s 2023-24 state budget proposes an additional $11.7 million one-time special funds and $6.5 ongoing special funds for DIR to help address wage claim processing times.

COMMENTS:

1. Purpose. According to the author:

The current system of labor law enforcement is inadequate to meet the needs of California’s immense workforce. As a result, companies that violate labor laws are unlikely to get caught. This creates a race to the bottom where employers cut costs on the backs of workers. Law-abiding employers are put at a competitive disadvantage for resisting the business model of labor law violation.

1. Support and Opposition. This bill is sponsored by the California Labor Federation, which argues “There are numerous barriers to enforcement even if [state and local] agencies were well-funded, but instead, these agencies are underfunded and understaffed.” The sponsor believes this bill will “maximize the tools available to public enforcement agencies to give workers access to justice, hold companies that break the law accountable, and secure our state safety net.” This bill is also supported by other labor organizations, employment attorneys, and San Diego and San Francisco city attorneys’ offices.

This bill is opposed by a large coalition of employers, led by the California Chamber of Commerce, which argues “Efforts to bolster enforcement should be focused on improving [LC] statewide enforcement rather than side-stepping that issue by deputizing local city and county officials.” The coalition notes “The cases they choose, their proffered interpretations of the law, the quality of investigation and prosecution, and whether they have the resources to prosecute is likely to vary significantly” across cities and counties.

1. Wage Theft. Despite boasting some of the strictest labor laws in the nation, California’s workforce continues to experience rampant labor law violations. According to the Economic Policy Institute, California recovered over $221 million in unpaid wages between 2017 and 2020. However, DIR and the LC are overburdened by the amount of enforcement actions waiting adjudication. While existing law requires the LC to hear wage claims within 120 days, absent a settlement agreement, and issue a decision within 15 days, the average wait time for a wage claim in 2021 was 335 days. Unfortunately, such a delay of over 220 days already reflects a significant improvement in processing times from previous years – in 2019, the average wait time for a wage claim was 536 day. This bill authorizes public prosecutors to bring a civil or criminal claim against an employer to help enforce labor law violations.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 18, 2023

ASSEMBLY COMMITTEE ON JUDICIARY

Brian Maienschein, Chair

ABPCA Bill Id:AB 594

Author:(Maienschein) – As Amended Ver:April 13, 2023

SUBJECT: Labor Code: alternative enforcement

KEY ISSUE: SHOULD THE LEGISLATURE HELP ENSURE THE FULL EFFECT OF state LABOR LAW BY AUTHORIZING PUBLIC PROSECUTORS TO BRING civil CLAIMS FOR VIOLATIONS OF SPECIFIED LABOR LAWS?

SYNOPSIS

California is known nationwide as a leader in labor laws designed to protect workers from abuse. The state has often led the vanguard in passing progressive legislation targeted to disincentivize widespread abuse throughout various industries. Despite these statutory developments, the state continues to be home to rampant labor violations. According to the Economic Policy Institute, between 2017 – 2020, between the Department of Industrial Relations (DIR) and the Office of the Attorney General, California recovered over $221 million in unpaid wages. Wage theft often occurs as a side effect of worker misclassification, which refers to the practice of employers identifying their workers as a category other than full-time or part-time employees, such as “independent contractors.” A recent study from the National Employment Law Project found that between 2017 – 2018, 90% of businesses inspected by a state agency were found to be out of compliance with worker classification laws, resulting in $7.8 million assessed in lost wages. Compounding the issue is the reality that DIR and the Labor Commissioner (LC) are already overburdened with the amount of enforcement actions waiting adjudication. While current law requires wage claims to be heard within 120 days, absent a settlement agreement, and a decision issued within 15 days, the average wait time for a wage claim in 2021 was 335 days.

This bill attempts to provide a solution to the staggering amounts of unaddressed labor violations in the state by authorizing public prosecutors to bring a civil claim for violations of some provisions of the Labor Code. Specifically, this bill authorizes public prosecutors to enforce Divisions One, Two, and Three of the Labor Code. Beyond expanding enforcement capacity, which is clearly much needed, the bill also importantly ensures that a public prosecutor is able to enforce violations on behalf of a worker even if that worker has entered into an agreement with their employer mandating disputes be resolved through private arbitration.

This bill is sponsored by the California Labor Federation, and supported by a coalition of labor organizations and workers’ rights advocates. It is opposed by a broad business coalition, including the California Chamber of Commerce. This bill was previously heard by the Assembly Committee on Labor and Employment, and passed out on a vote of 5-2.

SUMMARY: Authorizes public prosecutors to enforce wage and hour laws through civil actions. Specifically, this bill:

1. Makes various findings and declarations regarding the pervasiveness of wage theft in California, its impact on local communities and the state at large, and the role of public enforcement agencies in curbing the practice.
2. Defines “public prosecutor” to mean a district attorney, a city attorney, a county counsel, or any other city or county prosecutor.
3. Authorizes a public prosecutor to prosecute an action, either civil or criminal, for a violation of Divisions One, Two or Three of the Labor Code or to enforce those sections independently and without specific direction of the Division of Labor Standards Enforcement, the Division of Workers’ Compensation, or the Division of Occupational Safety and Health, as applicable.
4. Limits the authority of a public prosecutor to redressing violations occurring within the public prosecutor’s geographic jurisdiction unless the public prosecutor is in a city with a population in excess of 750,000 or is otherwise authorized to enforce the Labor Code statewide.
5. Authorizes a public prosecutor to seek injunctive relief, in addition to any other remedies available, for continued violations of the specified sections of the Labor Code.
6. Requires a court to award a prevailing plaintiff reasonable attorney’s fees and costs, including expert witness fees.
7. Makes any agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration ineffective on the proceedings or on the authority of the public prosecutor to enforce the provisions of this bill in any action initiated by a public prosecutor.
   1. Prohibits any subsequent appeal of the denial of any motion or other court filing to impose a restriction considered by 7) on a public prosecutor from staying the trial court proceedings, subject to existing law.
8. Authorizes the Labor Commissioner, in addition to the administrative process set forth in the enforcement section relating to the willful misclassification of employees, to issue a determination on behalf of a worker that a person or employer has violated existing misclassification law for purposes of recovery pursuant to enforcement by the Labor Commissioner as a civil penalty through the issuance of a citation. Requires the procedures for issuing, contesting, and enforcing judgments for citations issued by the Labor Commissioner to be the same as those set forth in specified sections of existing law.
9. Limits recovery by an employee to only one of the following for the same violation:
   1. The statutory penalty provided for in existing law; or
   2. Enforcement of a civil penalty via the Labor Code Private Attorneys General Act.
10. Authorizes enforcement by the Labor Commissioner in either a civil suit or existing administrative investigative procedures.

EXISTING LAW:

1. Establishes the Department of Industrial Relations (DIR) in the Labor and Workforce Development Agency (LWDA), administered by the Director of Industrial Relations, and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. (Labor Code Section 50.5. Unless otherwise noted all future references are to the Labor Code.)
2. Establishes within the DIR, various entities, including but not limited to, the Labor Commissioner (LC), the Division of Workers Compensation (DWC), and the California Division of Occupational Safety and Health (DOSH or Cal/OSHA). (Section 56.)
3. Requires the LC and authorized deputies and representatives, upon the filing of a claim by an employee, as specified, to, among other things, take assignments of:
   1. Wage claims and incidental expense accounts and advances;
   2. Mechanics’ and other liens of employees;
   3. Claims based on “stop orders” for wages and on bonds for labor;
   4. Claims for damages for misrepresentations of conditions of employment;
   5. Claims for penalties for nonpayment of wages;
   6. Claims for vacation, severance, or other supplemental compensation, as specified;
   7. Claims for loss of wages as the result of discharge from employment for the garnishment of wages; and
   8. Claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer’s premises. (Section 96.)
4. Provides that nothing in the payment of wages provisions of the Labor Code limits the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the LC. (Section 218.)
5. Requires, under the California Occupational Safety and Health Act, an employer to:
   1. Furnish employment and a place of employment that is safe and healthful for its employees;
   2. Furnish and use safety devices and safeguards, and to adopt and use practices, means, methods, operations, and processes, which are reasonably adequate to render employment and the place of employment safe and healthful; and
   3. Do everything reasonably necessary to protect the life, safety, and health of employees. (Section 6300 et seq.)
6. Prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individual’s compensation. (Section 226.8.)
7. Provides that if the LWDA or a court issues a determination that a person or employer has engaged in any of the acts described in 6) above, the person or employer shall be subject to a civil penalty of not less than five thousand dollars ($5,000) and not more than fifteen thousand dollars ($15,000) for each violation, in addition to any other penalties or fines permitted by law. (Section 226.8.)
8. Establishes a citation process for the LC to enforce violations of the minimum wage that includes, but is not limited to, the following procedural requirements:
   1. A citation issued to an employer must be in writing and must describe the nature of the violation, including reference to the statutory provision alleged to have been violated, if contract wages are unpaid, or both;
   2. The LC shall promptly take all appropriate action to enforce the citation and to recover the civil penalty assessed, wages, liquidated damages, and any applicable penalties, as specified;
   3. To contest a citation, a person shall within 15 business days after service of the citation, notify the office of the LC that appears on the citation of their appeal by a request for an informal hearing. The LC or their deputy or agent shall, within 30 days, hold a hearing;
   4. The decision of the LC shall consist of a notice of findings, findings, and an order, all of which must be served on all parties to the hearing within 15 days after the hearing by regular first-class mail;
   5. Any amount found due by the LC as a result of a hearing shall become due and payable 45 days after notice of the findings, written findings, and order have been mailed to the party assessed. A writ of mandate may be taken from this finding to the appropriate superior court;
   6. As a condition to filing a petition for a writ of mandate, the petitioner seeking the writ shall first post a bond with the LC equal to the total amount of any minimum wages, contract wages, liquidated damages, and overtime compensation that are due and owing, as specified and
   7. A person to whom a citation has been issued must, in lieu of contesting a citation pursuant to this section, transmit to the office of the LC designated on the citation the amount specified for the violation within 15 business days after issuance of the citation. (Section 1197.1 et seq.)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: California is known nationwide as a leader in strong labor laws designed to protect workers from abuse. The state has often led the vanguard in passing progressive legislation targeted to disincentivize rampant abuse throughout various industries. Recent examples include efforts to increase pay transparency (SB 1162 (Limon, 2022)), establishing a fast-food sector council to incorporate the voices of fast food workers and balance the power dynamic between massive multibillion dollar corporations such as McDonalds and their workers (AB 257 (Holden, 2022)), facilitate the unionization of agricultural workers (AB 2183 (Stone, 2022)), grant employees access to a minimum of 12 weeks of job-protected parental leave (SB 1383 (Jackson, 2020)) and, perhaps most famously, codify the definition of an employee and independent contractor to curb employers’ attempts to misclassify their workers (AB 5 (Gonzalez, 2019)). Despite these statutory developments, the state’s workforce continues to suffer from rampant labor violations.

According to the Economic Policy Institute, between 2017 and 2020, in actions by both the Department of Industrial Relations (DIR) and the Office of the Attorney General (AG), California recovered over $221 million in unpaid wages. (Ilhna Mangundayao, Celine McNicholas, Margaret Poydock, and Ali Sait More than 3 billion in stolen wages recovered for workers between 2017 and 2020, , Economic Policy Institute (December 22, 2021) at p.7, available at https://files.epi.org/uploads/240542.pdf.) Wage theft often occurs as a side effect of worker misclassification, which refers to the practice of employers identifying their workers as a category other than full-time or part-time employees, such as “independent contractors.” By misclassifying their workers, employers are often able to circumvent requirements imposed on employers on behalf of their employees, such as minimum wage and overtime requirements, and workers compensation contributions. Misclassification of employees as independent contractors is often considered payroll fraud, because of its intentional nature and the goal of evading the law, including in order to defraud workers, competitors, and the state. A recent study from the National Employment Law Project found that between 2017 – 2018, 90% of businesses inspected by a state agency were found to be out of compliance with worker classification laws, resulting in $7.8 million assessed in lost wages. (Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries, National Employment Law Project (October 2020) at p. 3 available at https://s27147.pcdn.co/wp-content/uploads/Independent-Contractor-Misclassification-Imposes-Huge-Costs-Workers-Federal-State-Treasuries-Update-October-2020.pdf.) These statistics are already staggering, and yet are likely an undercount, as much of the abusive practices occur in industries dominated by already-marginalized populations, such as the fast-food sector, garment workers, and agricultural labor. Many of these industries predominantly rely on low-income workers who, in turn, rely on each paychecks and are therefore unwilling to risk their jobs in order to bring an enforcement action against their employer. Additionally, many of the same workers may be immigrants and undocumented, and face retaliatory practices and unlawful threats of alerting law enforcement to their immigration status, further discouraging them from reporting any abuse. (Daniel Costa, Threatening migrants and shortchanging workers: Immigration is the government’s top federal law enforcement priority, while labor standards enforcement agencies are starved for funding and too understaffed to adequately protect workers, Economic Policy Institute (December 15, 2022) available at https://www.epi.org/publication/immigration-labor-standards-enforcement/.)

Compounding the issue is the reality that DIR and the LC are already overburdened with the amount of enforcement actions awaiting adjudication. While current law requires wage claims to be heard within 120 days (absent a settlement agreement), and a decision to be issued within 15 days, the average wait time for a wage claim in 2021 was 335 days. (Jeanne Kuang and Alejandro Lazo, Wage theft whack-a-mole: California workers win judgments against bosses but still don’t get paid, CalMatters (September 28, 2022) available at https://calmatters.org/california-divide/2022/09/california-wage-theft-cases/.) A delay of over 220 days reflects a significant improvement from previous years – in 2019 the average delay was 536 days. (Id.) Without an effective enforcement mechanism, California indisputably fails to live up to its reputation as the state with the strongest labor protections, rendering them practically irrelevant. According to the author:

The current system of labor law enforcement is inadequate to meet the needs of California’s immense workforce. As a result, companies that violate labor laws are unlikely to get caught. This creates a race to the bottom where employers cut costs on the backs of workers. Law-abiding employers are put at a competitive disadvantage for resisting the business model of labor law violation.

California must do better in protecting workers’ rights and holding abusive companies accountable. This bill provides new tools to public enforcement agencies to cite violators, win injunctive relief and provide timely justice to workers.

This bill attempts to provide a solution to the staggering amounts of unaddressed labor violations in the state by authorizing public prosecutors to bring a civil claim for violations of some provisions of the Labor Code. Specifically, this bill authorizes public prosecutors to enforce Divisions One, Two, and Three of the Labor Code. Division One includes much of the administrative implementation of the DIR. Division Two addresses employment regulation and supervision, including laws regarding compensation, working hours, and industry-specific laws. Finally, Division Three focuses on employment relations – namely defining an employee, the obligations of employers, and termination statutes. The bill directs courts to award a prevailing plaintiff injunctive relief and reasonable attorney’s fees, in addition to any other available remedies. Finally, the bill grants the LC the ability to recover a civil penalty, that would otherwise only be available through a civil action, in an administrative proceeding.

Beyond expanding enforcement capacity, which is clearly much needed as detailed previously in this analysis, this bill also importantly ensures that a public prosecutor is able to enforce violations on behalf of a worker even if that worker has entered into an agreement with their employer mandating disputes be resolved through private arbitration. Arbitration agreements effectively prevent employees from bringing claims in court either independently, or as a class. According to a 2018 study by the Economic Policy Institute, approximately 56% of private-sector nonunion employees were subject to mandatory arbitration, and 30% of employers included class action waivers. (Alexander J.S. Colbin, The growing use of mandatory arbitration: Access to the courts is now barred for more than 60 million American workers (Economic Policy Institute) April 6, 2018, available here: https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/.) Also in 2018, the United States Supreme Court upheld the validity of forced arbitration agreements and class waivers in Epic Systems Corp. v. Lewis (128 S. Ct. 161 1612 (2018).) In light of the existing dominance of arbitration agreements and the Epic Systems decision, the Center for Popular Democracy and the Economic Policy Institute estimate that by 2024, more than 80% of nonunion private-sector workers will be covered by arbitration agreements. (Hamaji et. al., Unchecked corporate power: Forced arbitration, the enforcement crisis, and how workers are fighting back, Economic Policy Institute (May 20, 2019) at https://www.epi.org/publication/unchecked-corporate-power/.) As such, ensuring that public prosecutors are not barred from civil action against employers by way of a likely private arbitration clause is an important element of this bill’s effort to expand public enforcement capacity.

Concerns raised by the opposition appear to be largely addressed. The opposition posits that enforcement of some of the provisions intended to be captured by this bill are best left to the respective agencies that currently oversee their enforcement. For example, the Chamber of Commerce argues that workers’ compensation is a “fragile” system, and regarding workers compensation, “[t]he ‘grand bargain’ created an exclusive remedy for injured workers in a no-fault workers’ compensation system. It is carefully crafted with its own unique laws and administrative procedures. AB 594 undermines exclusive remedy.” The Chamber also makes similar arguments relating to the enforcement of health and safety standards by California Division of Occupational Safety and Health. However, the latest set of amendments limit the application of the bill to Divisions one through three of the Labor Code, as discussed previously. The bill no longer authorizes enforcement of either Division four or five (the divisions related to workers compensation and CalOSHA) by public enforcement. Therefore, this concern appears to have been addressed.

Additionally, the opposition posits that this bill risks creating inconsistent enforcement throughout the state. However, it is possible that labor laws ultimately are enforced “inconsistently” as a result of local prosecutor’s intimate knowledge of their local communities, which subsequently allow them to determine whether an employer is actually a bad actor, or is instead in need of additional supports for both them and their employees. Additionally, to the degree existing law already authorizes district attorneys to enforce certain violations of the Labor Code, this bill does not create the issue. Finally, it is arguable that in light of the severe lack of enforcement, which bad actors ultimately benefit from, even inconsistent enforcement is better than none at all.

This bill is an inappropriate vehicle to address the opposition’s grievance with existing law granting workers the ability to recover civil penalties under PAGA. Moreover, the opposition raises the concern that AB 594 does not include language expressly prohibiting “double recovery.” The worry appears to be the scenario that a single employer is sued first by a city attorney, for example, and then subsequently by the individual aggrieved employee utilizing the Public Attorneys General Act (PAGA). As a threshold matter, it is unlikely that a worker, made whole through a civil action brought by a public prosecutor, would take the time and money necessary to bring a PAGA claim against their employer. In the same way that the vast majority of employers are good employers, the vast majority of employees are good employees, and are not looking for every potential opportunity to bring litigation against employers. Once those who have been harmed by their bad-acting employers receive what is due to them, it is far more likely that they will move on with their lives, rather than turn around and file more costly litigation.

However, even in the event that such a subsequent PAGA claim does occur, the opposition’s argument fails to appropriately distinguish the purpose of both a PAGA claim and a civil enforcement suit. As described in the case law cited by the opposition, PAGA “is legally and conceptually different from an employee’s own suit for damages and statutory penalties. […] Relief under PAGA is designed primarily to benefit the general public, not the party bringing the action.” (Kim v. Reins International California Incorporated, 9 Cal.5th 73, 82.) Moreover, “civil penalties recovered on the state’s behalf are intended to ‘remediate present violations and deter future ones,’ not to redress employees’ injuries.” (Id. at p. 86.)

While it may be possible that a business who engages in a labor law violation may be subject to both a civil suit by a public prosecutor as granted under the provisions of this bill, as well as a PAGA claim, the purpose of each claim is distinct. Including language in this bill to remove recovery of one in favor of another arguably flies in the face of the legislative purpose of PAGA – to authorize individual workers to recoup the penalties on behalf of the state, as authorized by the Labor Code.

Moreover, it is a dubious approach as a policy matter to take away a right of action granted to an individual by the Legislature in an attempt to ensure full enforcement of the state’s labor laws because of an independent decision by a public prosecutor who may or may not obtain the express agreement of the aggrieved individual to bring such a claim. Doing so would essentially amount to the government arbitrarily deciding to preclude a worker’s ability to enforce their own rights.

It appears that the root of the concern raised by the opposition is, in fact, with the overall availability of PAGA for aggrieved employees and a potential lack of clarity regarding when a PAGA claim may ultimately be precluded by a successful civil action. To the extent that the oppositions concerns have merit, it is arguably more appropriate to address that concern in a different vehicle amending the PAGA statute directly, rather than in a circumspect or piecemeal manner by requesting amendments in every bill touching on PAGA. This bill does not appear to be the most appropriate method of addressing what seems to be a fundamental concern of the opposition with existing law.

ARGUMENTS IN SUPPORT: This bill is sponsored by the California Labor Federation, and is supported by a coalition of labor and workers’ rights advocates. In support of the bill the California Labor Federation writes:

Despite the best efforts of the Labor Commissioner and local agencies, enforcement of labor law violations is inadequate to meet the needs of California’s immense workforce. This state is home to 19 million workers, many of whom work in industries known to have high rates of labor law violations. There are numerous barriers to enforcement even if agencies were well-funded, but instead, these agencies are underfunded and understaffed.

Companies continue to develop more sophisticated ways to evade the law, including complex layers of contracting, the use of fictitious LLC and franchise agreements, app-based dispatch, and the widespread use of mandatory arbitration as a condition of employment. These practices make enforcement more time-intensive, limit workers’ ability to prove their claims, and prevent enforcement agencies from holding the responsible party liable.

In addition, the failure to enact immigration reform has left millions of immigrant workers trapped in jobs where their rights are violated, and employers use immigration threats to prevent them from reporting. These conditions require enforcement agencies to be proactive, strategic and culturally competent to provide outreach, education, and assistance. New tools like deferred action for workers in labor disputes offer some hope but only if enforcement agencies have the resources to utilize them.

Wage theft and practices like misclassification do not only impact workers, but they also put responsible employers who follow the law at a competitive disadvantage. The State of California is also harmed when labor laws are not enforced because more workers fall into poverty, the safety net is eroded, and payroll taxes are not paid.

Companies that violate labor laws are unlikely to get caught and they know it. This creates a race to the bottom where employers cut costs on the backs of workers. It is essential that we maximize the tools available to public enforcement agencies to give workers access to justice, hold companies that break the law accountable, and secure our state safety net.

AB 594 will expand enforcement options for workers and strengthen the tools available to enforcement agencies to combat widespread wage theft and other labor law violations. It expands the ability of local enforcement agencies to enforce labor laws and seek injunctive relief, it simplifies the citation process for the Labor Commissioner to address misclassification, and it clarifies that public agencies are not subject to arbitration agreements when enforcing labor laws to stop illegal practices.

ARGUMENTS IN OPPOSITION: This bill is largely opposed by business advocates such as the California Chamber of Commerce, the California Farm Bureau, and the Western Growers Association. In arguing against the bill, the California Chamber of Commerce writes:

AB 594 Will Create Inconsistent Enforcement

Providing this broad of authority to an array of local officials raises concerns regarding inconsistency in enforcement of the law. As raised in connection with prior legislation regarding local enforcement of statewide laws, different cities and counties are likely to have significantly different enforcement. The cases they choose, their proffered interpretations of the law, the quality of investigation and prosecution, and whether they have the resources to prosecute is likely to vary significantly. Efforts to bolster enforcement should be focused on improving DLSE statewide enforcement rather than side-stepping that issue by deputizing local city and county officials.

AB 594 Does not Specify Where Recovery Goes and Does not Protect Against Double Recovery

AB 594 leaves open important questions regarding monetary recovery. For example, presumably any owed wage would go to the workers upon whose behalf the public prosecutor has sued. But there is nothing in the bill that clarifies where penalties would go – to the worker? To the city or county prosecuting? The attorney’s fees provision also raises concerns regarding motivation. Because of the significant cost of litigating Labor Code claims, the vast majority of employers are likely to settle the case like they do now with private attorneys. Public prosecutors will have been spending significant taxpayer dollars to litigate the case (unlikely the DLSE, which is funded by employers’ annual assessments). There are concerns then about the motivation to increase settlement values to compensate for that and to add to the city or county’s own budget, an issue that does not exist regarding DLSE enforcement.

Further, the bill is silent as to its interaction with PAGA. PAGA cases have been interpreted by the court as being unique because the employee is seen as standing in the shoes of the state and are forever an aggrieved employee. Therefore, even if the employee recovers money for their individual claims or their claims have expired under the statute of limitations, they can still later serve as a PAGA plaintiff. See, e.g., Kim v. Reins International California, Inc., 9 Cal. 5th 73 (2009); Johnson v. Maxim Healthcare Services, Inc., 66 Cal. App. 5th 924 (2021). Similarly, here, an employee may argue that even if they were part of a settlement through city or county enforcement, they still have the right to bring a PAGA lawsuit.

REGISTERED SUPPORT / OPPOSITION:

Support

California Labor Federation (sponsor)

Alameda Labor Council
California Employment Lawyers Association
California Nurses Association
California Rural Legal Assistance Foundation, INC.
California State Legislative Board, Sheet Metal, Air, Rail and Transportation Workers - Transportation Division (SMART-TD)
Central Coast Labor Council
Consumer Attorneys of California
Contra Costa Central Labor Council
Council of Community Housing Organizations
Elevator Constructors Local 8
Los Angeles County Federation of Labor, AFL-CIO
North Bay Labor Council
Renaissance Entrepreneurship Center
Sacramento Central Labor Council, AFL-CIO
San Diego City Attorney's Office
San Francisco City Attorney's Office
TechEquity Collaborative
UFCW - Western States Council

Opposition

Acclamation Insurance Management Services
Allied Managed Care
Associated Builders and Contractors of California
Associated General Contractors
Associated General Contractors-san Diego Chapter
California Association for Health Services At Home
California Association of Joint Powers Authorities
California Association of Sheet Metal & Air Conditioning Contractors National Association
California Association of Winegrape Growers
California Attractions and Parks Association
California Building Industry Association
California Business Roundtable
California Chamber of Commerce
California Farm Bureau
California League of Food Producers
California Manufactures & Technology Association
California Restaurant Association
California Retailers Association
California Trucking Association
Coalition of Small & Disabled Veteran Business
Construction Employers' Association
Family Business Association of California
Flasher Barricade Association
National Federation of Independent Business
Western Growers Association

Analysis Prepared by: Manuela Boucher-de la Cadena/ JUD. / (916) 319-2334

Date of Hearing: April 12, 2023

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Ash Kalra, Chair

ABPCA Bill Id:AB 594 (

Author:Maienschein) – As Amended Ver:March 16, 2023

SUBJECT: Labor Code: alternative enforcement

SUMMARY: Authorizes public prosecutors to sue for violations of the labor code without specific authorization from the appropriate state entity and nullifies any agreements that limit an employee’s right to file in court on behalf of themselves or in a representative action. Permits the Labor Commissioner (LC) to issue on behalf of a worker a determination that an employer has engaged in willful misclassification as a civil penalty through the issuance of a citation.

Specifically, this bill:

1. Makes findings and declarations regarding the extent of wage theft and its harmful effects on workers, responsible employers, and state and local governments.
2. Defines “public prosecutor’ to mean a district attorney, a city attorney, a county counsel, or any other city or county prosecutor.
3. Expands the authorization for public prosecutors to prosecute violations of the wage provisions of the labor code to include prosecuting an action, either civil or criminal, for a violation of the code or to enforce the provisions of the code independently and without the specific direction of the Division of Labor Standards Enforcement (LC), the Division of Workers’ Compensation (DWC), or the Division of Occupational Safety and Health (Cal/OSHA), as applicable and limited to those violations occurring within the public prosecutor’s geographic jurisdiction, except as specified.
4. Authorizes a public prosecutor, in addition to any other remedies available, to seek injunctive relief to prevent continued violations of the Labor Code.
5. Requires a court in an action brought under 3) above to award a prevailing plaintiff its reasonable attorney’s fees and costs, including expert witness fees.
6. Provides that in an action initiated by a public prosecutor to enforce this code, any agreement between a worker and employer that purports to limit representative actions or to mandate private arbitration shall have no effect, as specified. Any motion or other court filing that seeks to compel a public prosecutor to arbitrate a claim due to any agreement between a worker and employer shall be deemed frivolous and any subsequent appeal of the denial of any motion or other court filing shall not stay the trial court proceedings, except as specified.
7. Authorizes the LC, as an alternative to the process set forth in the enforcement section pertaining to the willful misclassification of employees, to issue on behalf of a worker a determination that an employer has violated that section as a civil penalty through the issuance of a citation. The procedures for issuing, contesting, and enforcing judgments for citations under this section shall be the same as provided in Labor Code §1197.1.
8. States that an employee is entitled to only one of the following for the same violation in 7) above:
   1. The statutory penalty provided for in this section.
   2. To enforce a civil penalty pursuant to the Private Attorneys General Act.
9. Permits the LC to also enforce 7) above pursuant to her authority to conduct a hearing or in a civil suit.

EXISTING LAW:

1. Establishes the Department of Industrial Relations (DIR) in the Labor and Workforce Development Agency (LWDA), administered by the Director of Industrial Relations, and vests it with various powers and duties to foster, promote, and develop the welfare of the wage earners of California, to improve their working conditions, and to advance their opportunities for profitable employment. Labor Code §50.5.
2. Establishes within the DIR, various entities, including but not limited to, the LC, the DWC, and Cal/OSHA. Labor Code §56.
3. Requires the LC and authorized deputies and representatives, upon the filing of a claim by an employee, as specified, to, among other things, take assignments of:
   1. Wage claims and incidental expense accounts and advances.
   2. Mechanics’ and other liens of employees.
   3. Claims based on “stop orders” for wages and on bonds for labor.
   4. Claims for damages for misrepresentations of conditions of employment.
   5. Claims for penalties for nonpayment of wages.
   6. Claims for vacation, severance, or other supplemental compensation, as specified.
   7. Claims for loss of wages as the result of discharge from employment for the garnishment of wages.
   8. Claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer’s premises. Labor Code §96.
4. Provides that nothing in the payment of wages provisions of the labor code limits the authority of the district attorney of any county or prosecuting attorney of any city to prosecute actions, either civil or criminal, for violations or to enforce those provisions independently and without specific direction of the LC. Labor Code §218.
5. Requires, under the California Occupational Safety and Health Act, an employer to:
   1. Furnish employment and a place of employment that is safe and healthful for its employees.
   2. Furnish and use safety devices and safeguards, and to adopt and use practices, means, methods, operations, and processes, which are reasonably adequate to render employment and the place of employment safe and healthful.
   3. Do everything reasonably necessary to protect the life, safety, and health of employees. Labor Code § 6300 et seq.
6. Prohibits any person or employer from engaging in willful misclassification, as defined, of an individual as an independent contractor instead of an employee and in specified acts relating to the misclassified individual’s compensation. Labor Code §226.8.
7. Provides that if the LWDA or a court issues a determination that a person or employer has engaged in any of the acts described in 6) above, the person or employer shall be subject to a civil penalty of not less than five thousand dollars ($5,000) and not more than fifteen thousand dollars ($15,000) for each violation, in addition to any other penalties or fines permitted by law. Labor Code §226.8.
8. Establishes a citation process for the LC to enforce violations of the minimum wage that includes, but is not limited to, the following procedural requirements:
   1. A citation issued to an employer must be in writing and shall describe the nature of the violation, including reference to the statutory provision alleged to have been violated, if contract wages are unpaid, or both.
   2. The LC shall promptly take all appropriate action to enforce the citation and to recover the civil penalty assessed, wages, liquidated damages, and any applicable penalties, as specified.
   3. To contest a citation, a person shall within 15 business days after service of the citation, notify the office of the LC that appears on the citation of their appeal by a request for an informal hearing. The LC or their deputy or agent shall, within 30 days, hold a hearing.
   4. The decision of the LC shall consist of a notice of findings, findings, and an order, all of which shall be served on all parties to the hearing within 15 days after the hearing by regular first-class mail.
   5. Any amount found due by the LC as a result of a hearing shall become due and payable 45 days after notice of the findings, written findings, and order have been mailed to the party assessed. A writ of mandate may be taken from this finding to the appropriate superior court.
   6. As a condition to filing a petition for a writ of mandate, the petitioner seeking the writ shall first post a bond with the LC equal to the total amount of any minimum wages, contract wages, liquidated damages, and overtime compensation that are due and owing, as specified.
   7. A person to whom a citation has been issued shall, in lieu of contesting a citation pursuant to this section, transmit to the office of the LC designated on the citation the amount specified for the violation within 15 business days after issuance of the citation. Labor Code §1197.1 et seq.

FISCAL EFFECT: Unknown

COMMENTS: Note: This bill is double referred to the Assembly Judiciary Committee upon passage out of this Committee.

The extent of worker misclassification cannot be underscored. A 2000 study commissioned by the U.S. Department of Labor found that nationally between 10% and 30% of audited employers misclassified workers.^[1] As our workplaces and the nature of the employee-employer relationship evolves, new opportunities for misclassification have emerged. In 2017, California’s Employment Development Department Tax Audit Program conducted 7,937 audits and investigations, resulting in assessments totaling $249,981,712, and identified nearly half a million unreported employees.^[2] Recent research also supports the prevalence of misclassification and finds some of the highest misclassification rates in the economy’s growth industries, including home care, janitorial, trucking, construction, hospitality, security, and the app-based “on demand” sector.^[3]

Wage theft in California, which impacts low-wage workers disproportionately, is well documented. A 2022 report to the Legislature on the state’s wage claim adjudication process reveals that there were nearly 19,000 wage claims filed in 2021 with a total of $335 million being owed to workers.^[4] Due to challenges in staffing, resources, and a growing case backlog, only approximately $40 million has been in paid in awards or settlements through the wage claim adjudication unit of the LC.^[5]

According to the author, “The current system of labor law enforcement is inadequate to meet the needs of California’s immense workforce. As a result, companies that violate labor laws are unlikely to get caught. This creates a race to the bottom where employers cut costs on the backs of workers. Law-abiding employers are put at a competitive disadvantage for resisting the business model of labor law violation.

California must do better in protecting workers’ rights and holding abusive companies accountable. This bill provides new tools to public enforcement agencies to cite violators, win injunctive relief and provide timely justice to workers.”

Committee Comments

Opponents of this measure argue, among other things, that giving broad enforcement authority to public prosecutors will lead to inconsistent results. They opine that local jurisdictions may vary in how they interpret the law, pursue investigating a case, or in their decision to prosecute. This assertion is made, however, with no evidence. Yet, as opponents themselves point out, public prosecutors already have the authority to prosecute claims regarding the payment of wages under state law. This authority was established by legislation over eighty years ago. If, in fact, giving them the authority to prosecute a sizable subset of labor law led to varying outcomes, one would expect the legal data to support this conclusion.

Arguments in Support

The California Labor Federation, sponsor of the bill, states, “Despite the best efforts of the Labor Commissioner and local agencies, enforcement of labor law violations is inadequate to meet the needs of California’s immense workforce. This state is home to 19 million workers, many of whom work in industries known to have high rates of labor law violations. There are numerous barriers to enforcement even if agencies were well-funded, but instead, these agencies are underfunded and understaffed.

Companies continue to develop more sophisticated ways to evade the law, including complex layers of contracting, the use of fictitious LLC and franchise agreements, app-based dispatch, and the widespread use of mandatory arbitration as a condition of employment. These practices make enforcement more time-intensive, limit workers’ ability to prove their claims, and prevent enforcement agencies from holding the responsible party liable.

In addition, the failure to enact immigration reform has left millions of immigrant workers trapped in jobs where their rights are violated, and employers use immigration threats to prevent them from reporting. These conditions require enforcement agencies to be proactive, strategic and culturally competent to provide outreach, education, and assistance. New tools like deferred action for workers in labor disputes offer some hope but only if enforcement agencies have the resources to utilize them.”

Arguments in Opposition

“While we appreciate and support the efforts to increase state enforcement of labor laws, public prosecutors are already permitted under Labor Code section 218 to prosecute a number of wage and hour violations. Intentionally withholding wages is also already a crime for which employers can be prosecuted in a criminal action. AB 594’s expansion of public enforcement to the entire Labor Code sweeps up issues that belong under the umbrella of the divisions created specifically to deal with these areas of law.

Providing this broad of authority to an array of local officials raises concerns regarding inconsistency in enforcement of the law. As raised in connection with prior legislation regarding local enforcement of statewide laws, different cities and counties are likely to have significantly different enforcement. The cases they choose, their proffered interpretations of the law, the quality of investigation and prosecution, and whether they have the resources to prosecute is likely to vary significantly. Efforts to bolster enforcement should be focused on improving DLSE statewide enforcement rather than side-stepping that issue by deputizing local city and county officials.”

Prior Legislation

SB 459 (Corbett) Chapter 706, Statutes of 2011, prohibits willful misclassification, as defined, of individuals as independent contractors. The bill also prohibits charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation, as specified, where those acts would have violated the law if the individuals had not been mischaracterized.

REGISTERED SUPPORT / OPPOSITION:

Support

California Labor Federation (Sponsor)
AFSCME
Alameda Labor Council
California Conference Board of The Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
California Federation of Teachers 
California Nurses Association
California Rural Legal Assistance Foundation
California State Council of Service Employees International Union (SEIU California)
California State Legislative Board, Sheet Metal, Air, Rail and Transportation Workers - Transportation Division (SMART-TD)
California Teamsters Public Affairs Council
Central Coast Labor Council
Consumer Attorneys of California
Contra Costa Central Labor Council
Engineers and Scientists of California, IFPTE Local 20
Sacramento Central Labor Council
Techequity Collaborative
UFCW - Western States Council
Unite-HERE
Utility Workers Union of America

Oppose

Acclamation Insurance Management Services
Allied Managed Care
Associated Builders and Contractors of California
Associated General Contractors of California
Associated General Contractors-san Diego Chapter
California Association for Health Services At Home
California Association of Joint Powers Authorities
California Association of Sheet Metal & Air Conditioning Contractors National Association
California Association of Winegrape Growers
California Building Industry Association
California Business Roundtable
California Chamber of Commerce
California Coalition on Workers Compensation
California Farm Bureau
California League of Food Producers
California Manufactures & Technology Association
California Restaurant Association
California Retailers Association
Coalition for Small and Disabled Veteran Businesses
Construction Employers' Association
Family Business Association of California
Flasher Barricade Association
National Federation of Independent Business (NFIB)
Western Growers Association

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

1. See the National Employment Law Project’s (NELP) Fact Sheet “Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries,” https://www.nelp.org/publication/independent-contractor-misclassification-imposes-huge-costs-on-workers-and-federal-and-state-treasuries-update-2017/. ↑

2. Employment Development Department 2018 Annual Report on Fraud Deterrence and Detection Activities, https://edd.ca.gov/About_EDD/pdf/Fraud_Deterrence_and_Detection_Activities_2018.pdf. ↑

3. See NELP’s Fact Sheet in footnote 1. ↑

4. Wage Claims Adjudication Unit Annual Report Pursuant to Labor Code Section 96.1, Calendar Year 2021, California Labor Commissioner’s Office, p. 15. ↑

5. Ibid. ↑