Existing law establishes in the Department of Industrial Relations the Division of Labor Standards Enforcement under the direction of the Labor Commissioner and authorizes the Labor Commissioner to investigate employee complaints and recover civil penalties for violations of labor law, as prescribed. Existing law requires an employer who pays wages to a resident employee for services performed either within or without this state, or to a nonresident employee for services performed in this state, to deduct and withhold from those wages a sum which is substantially equivalent to the amount of tax reasonably estimated to be due under the Personal Income Tax Law resulting from the inclusion in the gross income of the employee of the wages which were subject to withholding. Existing law requires the Employment Development Department to have the powers and duties necessary to administer the reporting, collection, refunding to the employer, and enforcement of taxes required to be withheld by employers, as described above.

This bill would require, within 60 days of a final judgment being entered against an employer requiring payment to an employee or to the state, as specified, the judgment debtor employer to provide documentation to the Labor Commissioner that the judgment is fully satisfied, a certain bond has been posted, or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed, and is in compliance with that agreement. The bill would make a judgment debtor employer who fails to comply with that provision liable for a civil penalty. The bill would require, if a judgment debtor employer does not comply with that provision, the Labor Commissioner to provide written notice to the judgment debtor employer that the Labor Commissioner will submit the unsatisfied judgment to the Tax Support Division of the Employment Development Department as a notice of potential tax fraud, as prescribed, and that the civil penalty is due within 90 days of the notice.

Existing law establishes in the Department of Industrial Relations the Division of Labor Standards Enforcement under the direction of the Labor Commissioner and authorizes the Labor Commissioner to investigate employee complaints and recover civil penalties for violations of labor law, as prescribed. Existing law requires an employer who pays wages to a resident employee for services performed either within or without this state, or to a nonresident employee for services performed in this state, to deduct and withhold from those wages a sum which is substantially equivalent to the amount of tax reasonably estimated to be due under the Personal Income Tax Law resulting from the inclusion in the gross income of the employee of the wages which were subject to withholding. Existing law requires the Employment Development Department to have the powers and duties necessary to administer the reporting, collection, refunding to the employer, and enforcement of taxes required to be withheld by employers, as described above.

This bill would require, within 60 days of a final judgment being entered against an employer requiring payment to an employee or to the state, as specified, the judgment debtor employer to provide documentation to the Labor Commissioner that the judgment is fully satisfied, a certain bond has been posted, or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed, and is in compliance with that agreement. The bill would make a judgment debtor employer who fails to comply with that provision liable for a civil penalty. The bill would require, if a judgment debtor employer does not comply with that provision, the Labor Commissioner to provide written notice to the judgment debtor employer that the Labor Commissioner will submit the unsatisfied judgment to the Tax Support Division of the Employment Development Department as a notice of potential tax fraud, as prescribed. prescribed, and that the civil penalty is due within 90 days of the notice.

Existing law establishes in the Department of Industrial Relations the Division of Labor Standards Enforcement under the direction of the Labor Commissioner and authorizes the Labor Commissioner to investigate employee complaints and recover civil penalties for violations of labor law, as prescribed. Existing law requires an employer who pays wages to a resident employee for services performed either within or without this state, or to a nonresident employee for services performed in this state, to deduct and withhold from those wages a sum which is substantially equivalent to the amount of tax reasonably estimated to be due under the Personal Income Tax Law resulting from the inclusion in the gross income of the employee of the wages which were subject to withholding. Existing law requires the Employment Development Department to have the powers and duties necessary to administer the reporting, collection, refunding to the employer, and enforcement of taxes required to be withheld by employers, as described above above.

This bill would require, within 60 days after an order, decision, award, or judgment of a final judgment being entered against an employer requiring payment to an employee or to the state becomes final, state, as specified, the judgment debtor employer to provide documentation to the Labor Commissioner that the judgment is fully satisfied, a certain bond has been posted, or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed, and is in compliance with that agreement. The bill would make a judgment debtor employer who fails to comply with that provision liable for a civil penalty. The bill would require, if a judgment debtor employer does not comply with that provision, the Labor Commissioner to provide written notice to the judgment debtor employer that the Labor Commissioner will submit the order, decision, award, or unsatisfied judgment to the Tax Support Division of the Employment Development Department as a notice of potential tax fraud, as prescribed.

Existing law establishes in the Department of Industrial Relations the Division of Labor Standards Enforcement under the direction of the Labor Commissioner and authorizes the Labor Commissioner to investigate employee complaints and recover civil penalties for violations of labor law, as prescribed. Existing law requires an employer who pays wages to a resident employee for services performed either within or without this state, or to a nonresident employee for services performed in this state, to deduct and withhold from those wages a sum which is substantially equivalent to the amount of tax reasonably estimated to be due under the Personal Income Tax Law resulting from the inclusion in the gross income of the employee of the wages which were subject to withholding. Existing law requires the Employment Development Department to have the powers and duties necessary to administer the reporting, collection, refunding to the employer, and enforcement of taxes required to be withheld by employers, as described above

This bill would require, within 60 days after an order, decision, award, or judgment against an employer requiring payment to an employee or to the state becomes final, as specified, the judgment debtor employer to provide documentation to the Labor Commissioner that the judgment is fully satisfied, a certain bond has been posted, or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed, and is in compliance with that agreement. The bill would make a judgment debtor employer who fails to comply with that provision liable for a civil penalty. The bill would require, if a judgment debtor employer does not comply with that provision, the Labor Commissioner to provide written notice to the judgment debtor employer that the Labor Commissioner will submit the order, decision, award, or judgment to the Tax Support Division of the Employment Development Department as a notice of potential tax fraud, as prescribed.

(1)Existing law establishes in the Department of Industrial Relations the Division of Labor Standards Enforcement under the direction of the Labor Commissioner and authorizes the Labor Commissioner to investigate employee complaints and recover civil penalties for violations of labor law, as prescribed.

This bill would require, within 60 days after an order, decision, award, or judgment against an employer requiring payment to an employee or to the state becomes final, as specified, the judgment debtor employer to provide documentation to the Labor Commissioner that the judgment is fully satisfied, a certain bond has been posted, or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed, and is in compliance with that agreement.

(2)Existing law requires the Department of Motor Vehicles to suspend, cancel, or revoke the registration of a vehicle when the department determines that, among other circumstances, the registration was obtained by providing false evidence of financial responsibility. Existing law requires, upon receipt of a duly certified abstract of the record of a court showing that a person has been convicted of specified crimes or offenses, the department to immediately revoke the privilege of the person to drive a motor vehicle. Existing law requires a persons privilege to operate a motor vehicle be suspended upon notification by a bank or financial institution that a check has been dishonored when that check was presented to the Department of Motor Vehicles for payment of a fine, fee, or penalty, as specified.

This bill would require the Labor Commissioner to provide a written notice to a noncompliant judgment debtor employer that any drivers licenses and commercial vehicle registrations issued by the Department of Motor Vehicles and held by the judgment debtor shall be suspended 90 days from the date of the notice unless the judgment debtor employer complies and pays a certain civil penalty for noncompliance, as prescribed. The bill would require the Labor Commissioner to provide a notice to the Department of Motor Vehicles regarding a persistently noncompliant judgment debtor employer that includes a summary of the final judgment and the names and identifying information of the persons or entities liable for payment of the judgment, as prescribed.

This bill would require the Department of Motor Vehicles to suspend, cancel, or revoke the registration of a commercial vehicle when the Department of Motor Vehicles has received notification from the Labor Commissioner, pursuant to the provisions above, that the vehicle owner is subject to a judgment for nonpayment of wages entered upon an order, decision, or award that has become final and that the vehicle owner is not in compliance with the final order. Upon receipt of the Labor Commissioners notice, the bill would require the Department of Motor Vehicles to send a notice to an individual or entity subject to the judgment for nonpayment of wages that any commercial vehicles registered under their name will be suspended unless the entity or individual contacts the Labor Commissioner and complies with the above-provisions related to the judgment for nonpayment of wages. The bill would require the Department of Motor Vehicles to suspend the commercial vehicle registration 30 days from the date the Department of Motor Vehicles notice was mailed.

This bill would also require the Department of Motor Vehicles to suspend the drivers license of an individual person subject to a judgment for nonpayment of wages, as specified, upon notification from the Labor Commissioner pursuant to the above provisions.

 VETO  

Bill No: SB 355

Author: Pérez (D), et al.

Enrolled: 9/12/25

Vote: 27

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 4/9/25

AYES: Smallwood-Cuevas, Strickland, Cortese, Durazo, Laird

SENATE JUDICIARY COMMITTEE: 13-0, 4/29/25

AYES: Umberg, Niello, Allen, Arreguín, Ashby, Caballero, Durazo, Laird, Stern, Valladares, Wahab, Weber Pierson, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/23/25

AYES: Caballero, Seyarto, Cabaldon, Grayson, Richardson, Wahab

NO VOTE RECORDED: Dahle

SENATE FLOOR: 38-0, 5/29/25

AYES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

NO VOTE RECORDED: Limón, Reyes

SENATE FLOOR: 40-0, 9/9/25

AYES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Reyes, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

ASSEMBLY FLOOR: 79-0, 9/8/25 - See last page for vote

SUBJECT: Judgment debtor employers: Employment Development Department

SOURCE: California Federation of Labor Unions, AFL-CIO

Sheet Metal, Air, Rail, and Transportation Workers Local 105

DIGEST:

This bill 1) requires employers with unsatisfied judgments for owed wages to provide documentation to the Labor Commissioner (LC) that the judgment is fully satisfied or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed; 2) subjects the judgment debtor employer to a civil penalty for violations; and 3) requires the LC to notify the Tax Support Division of the Employment Development Department of unsatisfied judgments as a notice of potential tax fraud.

Assembly Amendments

of 6/26/25 make clarifying changes and add a 90-day timeline within which the prescribed civil penalty against an employer will be due.

ANALYSIS:

Existing law:

1. Establishes within the Department of Industrial Relations (DIR), various entities including the Division of Labor Standards Enforcement (DLSE) under the direction of the 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)
2. Establishes a citation process for the LC to enforce violations of the minimum wage that includes, among others, the following procedural requirements:
   1. A citation issued to an employer, as specified.
   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.
   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. 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.
   5. 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.)
3. Requires the LC, within 15 days after the hearing is concluded, to file in the office of the division a copy of the order, decision, or award (ODA). The ODA shall include a summary of the hearing and the reasons for the decision. Additionally, the ODA includes any sums found owing, damages proved, and any penalties awarded pursuant to the Labor Code, including interest on all due and unpaid wages, as specified. (Labor Code §98.1)
4. Requires, upon filing of the ODA, the LC to:
   1. Serve a copy of the decision personally, by first-class mail, or in the manner specified in Section 415.20 of the Code of Civil Procedure on the parties.
   2. Advise the parties of their right to appeal the decision or award and further advise the parties that failure to do so within 10 days shall result in the decision or award becoming final and enforceable as a judgment by the superior court. (Labor Code §98.1 and §98.2)
5. Provides that if a final judgment against an employer arising from the employer’s nonpayment of wages for work performed in this state remains unsatisfied after a period of 30 days after the time to appeal therefrom has expired and no appeal therefrom is pending, the employer shall not continue to conduct business in this state, as specified, unless the employer has obtained a bond from a surety company and has filed a copy of that bond with the Labor Commissioner. The bond shall be effective and maintained until satisfaction of all judgments for nonpayment of wages. The principal sum of the bond shall not be less than the following:
   1. Fifty thousand dollars ($50,000) if the unsatisfied portion of the judgment is no more than five thousand dollars ($5,000).
   2. One hundred thousand dollars ($100,000) if the unsatisfied portion of the judgment is more than five thousand dollars ($5,000) and no more than ten thousand dollars ($10,000).
   3. One hundred fifty thousand dollars ($150,000) if the unsatisfied portion of the judgment is more than ten thousand dollars ($10,000).

(Labor Code §238)

1. Specifies that if no appeal of the ODA is filed within the period specified, the ODA shall, in the absence of fraud, be deemed the final order. Existing law then requires the LC to file, within 10 days of the ODA becoming final, a certified copy of the final order with the clerk of the superior court of the appropriate county unless a settlement has been reached by the parties and approved by the LC. Judgment shall be entered immediately by the court clerk in conformity therewith. (Labor Code §98.2)
2. Requires, in order to ensure that judgments are satisfied, authorizes the LC to serve upon the judgment debtor, personally or by first-class mail at the last known address of the judgment debtor listed with the division, a form, as specified, to assist in identifying the nature and location of any assets of the judgment debtor. Requires the judgment debtor to complete the form and cause it to be delivered to the division within 35 days, unless the judgment has been satisfied. (Labor Code §98.2)
3. Provides that in case of willful failure by the judgment debtor to comply with a final judgment, the division or the judgment creditor may request the court to apply the sanctions provided in Section 708.170 of the Code of Civil Procedure including an order requiring a person to appear before the court. Failure to appear can result in a warrant to have the person brought before the court to answer for the failure to appear. (Labor Code §98.2)
4. Requires the LC to make every reasonable effort to ensure that judgments are satisfied, including taking all appropriate legal action. (Labor Code §98.2)
5. Authorizes, until January 1, 2029, a public prosecutor to prosecute an action, either civil or criminal, for a violation of certain provisions of the labor code or to enforce those provisions independently. (Labor Code §181)
6. Establishes the Employment Development Department (EDD) within the Labor and Workforce Development Agency. EDD is responsible for, among other duties, the collection of payroll taxes from employers in the following four categories: Unemployment Insurance Tax; Employment Training Tax; State Disability Insurance Tax; and California Personal Income Tax. EDD’s Tax Branch works with employers to ensure that necessary payroll taxes and information are reported promptly and accurately to the department. (Unemployment Insurance Code §301 et seq.)

This bill:

1. Requires a judgment debtor employer, within 60 days of a final judgment being entered against an employer requiring payment to an employee or the state pursuant to existing law, to provide documentation to the Labor Commissioner that any of the following is true:
   1. The judgment is fully satisfied.
   2. The bond required by subdivision (a) of Section 238 has been posted.
   3. The judgment debtor has entered into an agreement for the judgment to be paid in installments pursuant to subdivision (b) of Section 238 and is in compliance with that agreement.
2. Subjects a judgment debtor employer who fails to comply with the above provisions liable for a civil penalty of two thousand five hundred dollars ($2,500) in a citation issued by the Labor Commissioner.
3. Requires the LC, if a judgment debtor employer does not comply with the provisions specified in (1) above within the stipulated timeline, to, no later than 30 days from the passing of the 60 days, provide written notice to the judgment debtor employer that the LC will submit the unsatisfied judgment to the Tax Support Division of the EDD as a notice of potential tax fraud, and that the civil penalty, specified above, is due within 90 days of the notice.
4. If the judgment debtor employer does not both comply with the provisions specified in (1) above and pay the civil penalty prescribed by (2) within 90 days from the date of the written notice required by (3), then requires the Labor Commissioner to, within 30 days, provide to the EDD a notice that includes both of the following:
   1. A summary of the final judgment.
   2. The names and identifying information of the persons or entities liable for payment of the judgment, including social security numbers, taxpayer identification numbers, and addresses.

Background

Data on Wage Theft. 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.

State Auditor Report on the Labor Commissioner’s Office. In May 29, 2024, the California State Auditor released a report summarizing the findings of an audit of the Division of Labor Standards Enforcement. Among other things, the report found:

• The LC’s office often takes two years or longer to process wage claims, with a median of 854 days to issue a decision (more than six times longer than the law allows).
• The DLSE’s Enforcement Unit’s work results in only a small percentage of successful payment to workers. Between January 2018 and November 2023, about 28% of employers did not make LC‑ordered payments. The LC consequently obtained judgments against those employers. In roughly 24% of judgments during that time, or about 5,000 cases, the workers referred their judgments to the Enforcement Unit. The unit successfully collected the entire judgment amount in only 12% of those judgments, or in about 600 cases.

Employment Development Department Payroll Tax Collection

California’s Employment Development Department administers the State’s payroll tax programs and is one of the largest tax collection agencies in the nation. EDD’s Tax Branch administers the following payroll tax programs and works with employers to ensure that payroll taxes are reported promptly and accurately: Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance (SDI), and Personal Income Tax (PIT) Withholding.

Failure by employers to pay their workers and their state tax responsibilities contributes to the underground economy. As noted by EDD, when businesses operate in the underground economy, they illegally reduce the amount of money used for insurance, payroll taxes, licenses, employee benefits, safety equipment, and safety conditions. These types of employers then gain an unfair competitive advantage over businesses that comply with the various business laws. This causes unfair competition in the marketplace and forces law-abiding businesses to pay higher taxes and expenses.^[1]

Need for this bill?. According to the author: “Current enforcement mechanisms lack sufficient deterrents, allowing employers to treat wage theft as a calculated risk. They face very few tangible or immediate consequences for noncompliance, enabling them to deny claims, delay payments, or refuse payments altogether. SB 355 supports California workers who have been victims of wage theft by providing the Labor Commissioner’s Office (LCO) with a new enforcement tool by authorizing the LCO to submit a notice of an unpaid wage theft claim to the Tax Support Division of the EDD as potential tax fraud.”

Related/Prior Legislation

SB 261 (Wahab, 2025) aims to recover unpaid wages owed to workers by, among other things, subjecting, for final judgments unsatisfied after a period of 180 days, the employer to a civil penalty not to exceed three times the outstanding judgment amount.

SB 310 (Wiener, 2025) would permit the penalty for failure to pay wages owed to employees to be recovered through an independent civil action, as specified.

AB 1234 (Ortega, 2025) would, among other things, revise and recast the provisions relating to the process for the LC to investigate, hold a hearing, and make determinations relating to an employee’s complaint of wage theft. Among other things, the bill would impose an administrative fee payable in the amount of 30% of the ODA to be deposited into the Wage Recovery Fund, created by the bill, and appropriated to compensate the LC for the staffing required to investigate and recover wages and penalties owed to aggrieved employees.

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

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

According to the Assembly Appropriations Committee:

• Costs of approximately $4 million in the first year and $3.7 annually thereafter to the LC to issue and enforce citations against non-compliant employers (Labor Enforcement and Compliance Fund). Costs may be minimally offset by penalty revenue.
• Minor and absorbable costs to EDD to receive notices about non-compliant employers from the LC. EDD notes that this bill does not require EDD to investigate a non-compliant employer, so EDD does not anticipate related enforcement costs.
• Possible payroll tax revenue gain of an unknown amount, to the extent EDD identifies tax fraud by a non-compliant employer and recovers uncollected tax revenues (special fund).

SUPPORT: (Verified 10/16/25)

California Federation of Labor Unions, AFL-CIO (co-source)

Sheet Metal, Air, Rail, and Transportation Workers Local 105 (co-source)

California Federation of Teachers

California Immigrant Policy Center

California Nurses Association

California Rural Legal Assistance Foundation

California School Employees Association

California State Legislative Board of the SMART – Transportation Division

City of San Jose

Pilipino Workers Center

SEIU California State Council

Transport Workers Union of America, AFL-CIO

United Food and Commercial Workers, Western States Council

Worksafe

OPPOSITION: (Verified 10/16/25)

None received

ARGUMENTS IN SUPPORT: According to the sponsors:

“Current enforcement mechanisms lack sufficient deterrents, enabling employers to treat wage theft as a calculated risk, knowing that they face very few tangible or immediate consequences for noncompliance when the status quo allows them to deny claims, delay payments, or refuse payments altogether... The notice to the EDD is an important flag that there may be tax issues with the employer, either from failure to pay wages or misclassification of workers. This bill gives the LCO a powerful deterrent for employers who fail to pay outstanding wage theft judgments in a timely fashion, ensuring that the state does not continue to lose out on expected revenue and workers no longer have to continue waiting for the pay they have earned.”

GOVERNOR'S VETO MESSAGE:

This bill would require an employer subject to a final judgment for unpaid wages to provide the Labor Commissioner's Office with documentation that the judgment was paid. If the employer fails to provide the information, the Labor Commissioner's Office would be required to transmit the judgment to the Employment Development Department (EDD) as a notice of potential tax fraud and assess a civil penalty against the employer.

My Administration is committed to combatting wage theft and ensuring workers receive the pay they are owed. However, the proposed referral process would be costly, duplicative, and unlikely to significantly improve collections of unpaid wages. The Labor Commissioner's Office already coordinates extensively with EDD regarding potential employer tax fraud cases through existing task forces that combat the underground economy, including the Joint Enforcement Strike Force and the Labor Enforcement Task Force. Through these partnerships, the Labor Commissioner's Office shares information about cases, and EDD investigates and conducts enforcement when tax fraud is found. In 2024 alone, these coordinated efforts resulted in over 2,000 payroll tax audits and investigations and $213.5 million in assessments. Given limited resources and department capacity, creating an additional process that duplicates this focused work is not prudent.

For these reasons, I cannot sign this bill.

ASSEMBLY FLOOR: 79-0, 9/8/25

AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas

NO VOTE RECORDED: Nguyen

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

10/20/25 9:49:21

**** END ****

1. Ibid ↑

 UNFINISHED BUSINESS  

Bill No: SB 355

Author: Pérez (D), et al.

Amended: 6/26/25 in Assembly

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 4/9/25

AYES: Smallwood-Cuevas, Strickland, Cortese, Durazo, Laird

SENATE JUDICIARY COMMITTEE: 13-0, 4/29/25

AYES: Umberg, Niello, Allen, Arreguín, Ashby, Caballero, Durazo, Laird, Stern, Valladares, Wahab, Weber Pierson, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/23/25

AYES: Caballero, Seyarto, Cabaldon, Grayson, Richardson, Wahab

NO VOTE RECORDED: Dahle

SENATE FLOOR: 38-0, 5/29/25

AYES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

NO VOTE RECORDED: Limón, Reyes

ASSEMBLY FLOOR: 79-0, 9/8/25 - See last page for vote

SUBJECT: Judgment debtor employers: Employment Development Department

SOURCE: California Federation of Labor Unions, AFL-CIO

Sheet Metal, Air, Rail, and Transportation Workers Local 105

DIGEST:

This bill 1) requires employers with unsatisfied judgments for owed wages to provide documentation to the Labor Commissioner (LC) that the judgment is fully satisfied or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed; 2) subjects the judgment debtor employer to a civil penalty for violations; and 3) requires the LC to notify the Tax Support Division of the Employment Development Department of unsatisfied judgments as a notice of potential tax fraud.

Assembly Amendments

of 6/26/25 make clarifying changes and add a 90-day timeline within which the prescribed civil penalty against an employer will be due.

ANALYSIS:

Existing law:

1. Establishes within the Department of Industrial Relations (DIR), various entities including the Division of Labor Standards Enforcement (DLSE) under the direction of the 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)
2. Establishes a citation process for the LC to enforce violations of the minimum wage that includes, among others, the following procedural requirements:
   1. A citation issued to an employer, as specified.
   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.
   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. 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.
   5. 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.)
3. Requires the LC, within 15 days after the hearing is concluded, to file in the office of the division a copy of the order, decision, or award (ODA). The ODA shall include a summary of the hearing and the reasons for the decision. Additionally, the ODA includes any sums found owing, damages proved, and any penalties awarded pursuant to the Labor Code, including interest on all due and unpaid wages, as specified. (Labor Code §98.1)
4. Requires, upon filing of the ODA, the LC to:
   1. Serve a copy of the decision personally, by first-class mail, or in the manner specified in Section 415.20 of the Code of Civil Procedure on the parties.
   2. Advise the parties of their right to appeal the decision or award and further advise the parties that failure to do so within 10 days shall result in the decision or award becoming final and enforceable as a judgment by the superior court. (Labor Code §98.1 and §98.2)
5. Provides that if a final judgment against an employer arising from the employer’s nonpayment of wages for work performed in this state remains unsatisfied after a period of 30 days after the time to appeal therefrom has expired and no appeal therefrom is pending, the employer shall not continue to conduct business in this state, as specified, unless the employer has obtained a bond from a surety company and has filed a copy of that bond with the Labor Commissioner. The bond shall be effective and maintained until satisfaction of all judgments for nonpayment of wages. The principal sum of the bond shall not be less than the following:
   1. Fifty thousand dollars ($50,000) if the unsatisfied portion of the judgment is no more than five thousand dollars ($5,000).
   2. One hundred thousand dollars ($100,000) if the unsatisfied portion of the judgment is more than five thousand dollars ($5,000) and no more than ten thousand dollars ($10,000).
   3. One hundred fifty thousand dollars ($150,000) if the unsatisfied portion of the judgment is more than ten thousand dollars ($10,000).

(Labor Code §238)

1. Specifies that if no appeal of the ODA is filed within the period specified, the ODA shall, in the absence of fraud, be deemed the final order. Existing law then requires the LC to file, within 10 days of the ODA becoming final, a certified copy of the final order with the clerk of the superior court of the appropriate county unless a settlement has been reached by the parties and approved by the LC. Judgment shall be entered immediately by the court clerk in conformity therewith. (Labor Code §98.2)
2. Requires, in order to ensure that judgments are satisfied, authorizes the LC to serve upon the judgment debtor, personally or by first-class mail at the last known address of the judgment debtor listed with the division, a form, as specified, to assist in identifying the nature and location of any assets of the judgment debtor. Requires the judgment debtor to complete the form and cause it to be delivered to the division within 35 days, unless the judgment has been satisfied. (Labor Code §98.2)
3. Provides that in case of willful failure by the judgment debtor to comply with a final judgment, the division or the judgment creditor may request the court to apply the sanctions provided in Section 708.170 of the Code of Civil Procedure including an order requiring a person to appear before the court. Failure to appear can result in a warrant to have the person brought before the court to answer for the failure to appear. (Labor Code §98.2)
4. Requires the LC to make every reasonable effort to ensure that judgments are satisfied, including taking all appropriate legal action. (Labor Code §98.2)
5. Authorizes, until January 1, 2029, a public prosecutor to prosecute an action, either civil or criminal, for a violation of certain provisions of the labor code or to enforce those provisions independently. (Labor Code §181)
6. Establishes the Employment Development Department (EDD) within the Labor and Workforce Development Agency. EDD is responsible for, among other duties, the collection of payroll taxes from employers in the following four categories: Unemployment Insurance Tax; Employment Training Tax; State Disability Insurance Tax; and California Personal Income Tax. EDD’s Tax Branch works with employers to ensure that necessary payroll taxes and information are reported promptly and accurately to the department. (Unemployment Insurance Code §301 et seq.)

This bill:

1. Requires a judgment debtor employer, within 60 days of a final judgment being entered against an employer requiring payment to an employee or the state pursuant to existing law, to provide documentation to the Labor Commissioner that any of the following is true:
   1. The judgment is fully satisfied.
   2. The bond required by subdivision (a) of Section 238 has been posted.
   3. The judgment debtor has entered into an agreement for the judgment to be paid in installments pursuant to subdivision (b) of Section 238 and is in compliance with that agreement.
2. Subjects a judgment debtor employer who fails to comply with the above provisions liable for a civil penalty of two thousand five hundred dollars ($2,500) in a citation issued by the Labor Commissioner.
3. Requires the LC, if a judgment debtor employer does not comply with the provisions specified in (1) above within the stipulated timeline, to, no later than 30 days from the passing of the 60 days, provide written notice to the judgment debtor employer that the LC will submit the unsatisfied judgment to the Tax Support Division of the EDD as a notice of potential tax fraud, and that the civil penalty, specified above, is due within 90 days of the notice.
4. If the judgment debtor employer does not both comply with the provisions specified in (1) above and pay the civil penalty prescribed by (2) within 90 days from the date of the written notice required by (3), then requires the Labor Commissioner to, within 30 days, provide to the EDD a notice that includes both of the following:
   1. A summary of the final judgment.
   2. The names and identifying information of the persons or entities liable for payment of the judgment, including social security numbers, taxpayer identification numbers, and addresses.

Background

Data on Wage Theft. 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.

State Auditor Report on the Labor Commissioner’s Office. In May 29, 2024, the California State Auditor released a report summarizing the findings of an audit of the Division of Labor Standards Enforcement. Among other things, the report found:

• The LC’s office often takes two years or longer to process wage claims, with a median of 854 days to issue a decision (more than six times longer than the law allows).
• The DLSE’s Enforcement Unit’s work results in only a small percentage of successful payment to workers. Between January 2018 and November 2023, about 28% of employers did not make LC‑ordered payments. The LC consequently obtained judgments against those employers. In roughly 24% of judgments during that time, or about 5,000 cases, the workers referred their judgments to the Enforcement Unit. The unit successfully collected the entire judgment amount in only 12% of those judgments, or in about 600 cases.

Employment Development Department Payroll Tax Collection. California’s Employment Development Department administers the State’s payroll tax programs and is one of the largest tax collection agencies in the nation. EDD’s Tax Branch administers the following payroll tax programs and works with employers to ensure that payroll taxes are reported promptly and accurately: Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance (SDI), and Personal Income Tax (PIT) Withholding.

Failure by employers to pay their workers and their state tax responsibilities contributes to the underground economy. As noted by EDD, when businesses operate in the underground economy, they illegally reduce the amount of money used for insurance, payroll taxes, licenses, employee benefits, safety equipment, and safety conditions. These types of employers then gain an unfair competitive advantage over businesses that comply with the various business laws. This causes unfair competition in the marketplace and forces law-abiding businesses to pay higher taxes and expenses.^[1]

Need for this bill? According to the author: “Current enforcement mechanisms lack sufficient deterrents, allowing employers to treat wage theft as a calculated risk. They face very few tangible or immediate consequences for noncompliance, enabling them to deny claims, delay payments, or refuse payments altogether. SB 355 supports California workers who have been victims of wage theft by providing the Labor Commissioner’s Office (LCO) with a new enforcement tool by authorizing the LCO to submit a notice of an unpaid wage theft claim to the Tax Support Division of the EDD as potential tax fraud.”

Related/Prior Legislation

SB 261 (Wahab, 2025) aims to recover unpaid wages owed to workers by, among other things, subjecting, for final judgments unsatisfied after a period of 180 days, the employer to a civil penalty not to exceed three times the outstanding judgment amount.

SB 310 (Wiener, 2025) would permit the penalty for failure to pay wages owed to employees to be recovered through an independent civil action, as specified.

AB 1234 (Ortega, 2025) would, among other things, revise and recast the provisions relating to the process for the LC to investigate, hold a hearing, and make determinations relating to an employee’s complaint of wage theft. Among other things, the bill would impose an administrative fee payable in the amount of 30% of the ODA to be deposited into the Wage Recovery Fund, created by the bill, and appropriated to compensate the LC for the staffing required to investigate and recover wages and penalties owed to aggrieved employees.

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

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

According to the Assembly Appropriations Committee:

1. Costs of approximately $4 million in the first year and $3.7 annually thereafter to the LC to issue and enforce citations against non-compliant employers (Labor Enforcement and Compliance Fund). Costs may be minimally offset by penalty revenue.
2. Minor and absorbable costs to EDD to receive notices about non-compliant employers from the LC. EDD notes that this bill does not require EDD to investigate a non-compliant employer, so EDD does not anticipate related enforcement costs.
3. Possible payroll tax revenue gain of an unknown amount, to the extent EDD identifies tax fraud by a non-compliant employer and recovers uncollected tax revenues (special fund).

SUPPORT: (Verified 9/8/25)

California Federation of Labor Unions, AFL-CIO (co-source)

Sheet Metal, Air, Rail, and Transportation Workers Local 105 (co-source)

California Federation of Teachers

California Immigrant Policy Center

California Nurses Association

California Rural Legal Assistance Foundation

California School Employees Association

California State Legislative Board of the SMART – Transportation Division

City of San Jose

Pilipino Workers Center

SEIU California State Council

Transport Workers Union of America, AFL-CIO

United Food and Commercial Workers, Western States Council

Worksafe

OPPOSITION: (Verified 9/8/25)

None received

ARGUMENTS IN SUPPORT: According to the sponsors:

“Current enforcement mechanisms lack sufficient deterrents, enabling employers to treat wage theft as a calculated risk, knowing that they face very few tangible or immediate consequences for noncompliance when the status quo allows them to deny claims, delay payments, or refuse payments altogether... The notice to the EDD is an important flag that there may be tax issues with the employer, either from failure to pay wages or misclassification of workers. This bill gives the LCO a powerful deterrent for employers who fail to pay outstanding wage theft judgments in a timely fashion, ensuring that the state does not continue to lose out on expected revenue and workers no longer have to continue waiting for the pay they have earned.”

ASSEMBLY FLOOR: 79-0, 9/8/25

AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas

NO VOTE RECORDED: Nguyen

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

9/8/25 19:36:13

**** END ****

1. Ibid ↑

SENATE THIRD READING

STR Bill Id:SB 355

Author:(Pérez)

As Amended Ver:June 26, 2025

Majority vote

SUMMARY

Requires an employer with a final wage theft judgment to provide documentation to the Labor Commissioner (LC) regarding satisfaction of the judgment; and subjects a judgment debtor employer that fails to comply to a civil penalty, as well as requires the LC to notify the Employment Development Department (EDD) of the employer's unsatisfied judgment as a notice of potential tax fraud.

Major Provisions

1. Requires a judgment debtor employer, within 60 days of a final wage theft judgment being entered against an employer requiring payment to an employee or to the state, to provide documentation to the LC that any of the following is true:
   1. The judgment is fully satisfied.
   2. The required bond has been posted.
   3. The judgment debtor has entered into an agreement for the judgment to be paid in installments pursuant to existing law and is in compliance with that agreement.
2. Requires a judgment debtor employer who fails to comply with (1) above to be liable for a civil penalty of $2,500 in a citation issued by the LC.
3. Requires, if a judgment debtor employer does not comply with (1) above, the LC to, no later than 30 days from the passing of the deadline set forth in (1) above, provide written notice to the judgment debtor employer that:
   1. The LC will submit the unsatisfied judgment to the Tax Support Division of the EDD as a notice of potential tax fraud; and
   2. The $2,500 civil penalty is due within 90 days.
4. Requires the LC to provide the written notice required by (3) above by first-class mail at the last known address of the judgment debtor employer listed with the LC.
5. Requires, if the judgment debtor employer does not both comply with (1) above and pay the $2,500 civil penalty within 90 days from the date of the LC's notice, the LC to, within 30 days, provide to the EDD a notice that includes both of the following:
   1. A summary of the final judgment.
   2. The names and identifying information of the persons or entities liable for payment of the judgment, including social security numbers, taxpayer identification numbers, and addresses.

COMMENTS

Wage theft is the most prevalent type of theft in the country, causing more economic loss than all other types of theft combined. Recent studies estimate that California workers lose more than $2.3 to $4.6 billion in stolen wages each year.^[1] In California, workers can bring wage claims either through the LC or through a civil action in court.

However, even when workers prevail in their wage theft claims, they are more often than not unsuccessful in recovering the stolen money. A 2024 California State Auditor Report found that, between 2018 and 2023, the LC's Judgment Enforcement Unit was successful in collecting the entire amount owed in just 12 percent of the cases that were referred to the state for enforcement. A 2020 Legislative Analyst's Office report found that, for workers who filed wage claims in 2017, less than half who received an award for unpaid wages were able to collect any wages at all from their employer.

Existing law requires employers with unpaid wage theft judgments to cease business operations unless they have obtained a surety bond or reached an accord with an individual holding an unsatisfied final judgment. If an employer violates this requirement, they are subject to a civil penalty and the LC can file a lien on the employer's personal and real property, as well as issue a stop order.

California state payroll taxes and the EDD:

Wages in California are generally subject to all four of the state's payroll taxes:

1. Unemployment Insurance and Employment Training Tax are employer contributions and each have a taxable wage limit of $7,000 per employee, per calendar year.
2. State Disability Insurance and Personal Income Tax are withheld from employees' wages and do not have a taxable wage limit, meaning that the tax is applied to all wages earned by an employee.

The EDD's Tax Branch works with employers to ensure that necessary payroll taxes and information are reported promptly and accurately, as well as verifies the reporting of wages and enforces the timely payment of taxes.

According to the Author

"SB 355 is a critical step in holding wage-theft/tax evaders accountable. Despite existing laws, unscrupulous employers continue to withhold wages and evade tax obligations, thus harming workers, law-abiding businesses, and the state's tax base. This bill strengthens enforcement by ensuring that employers who refuse to pay wage theft judgments face real consequences—including increased coordination between the EDD and the Labor Commissioner's Office for tax fraud investigations."

The author adds that the bill will have a positive impact on underserved and marginalized communities, in that "Wage theft disproportionately impacts disadvantaged and immigrant communities, particularly in low wage job sectors where people of color, including Black and Latino workers, make up the majority of the workforce. These sectors include hospitality, construction car wash, garment, agriculture, and warehouse industries. Undocumented Californians are nearly three times more likely than documented Californians to experience minimum wage violations, often due to fear of retaliation. In fact, minimum wage violations alone in California contribute to a 22.9% increase in poverty rates among affected workers. These disparities highlight the devastating impact of wage theft, especially on our most vulnerable workers."

Arguments in Support

A coalition of labor unions and workers' rights organizations state in support that "SB 355 provides the LC with new enforcement tools to address the failure to pay wage judgments. First, it requires employers who have an outstanding Order, Decision or Award (ODA) to notify the LC if they have already paid the judgment, have posted bond, or have entered into an agreement to pay, after 60 days of an ODA becoming final. This simple requirement will clear up many cases that are already closed and are creating backlogs at the LC, saving the agency valuable resources.

Secondly, when an employer fails to pay an order, decision, or award for wage theft to a worker, it authorizes the LC to provide written notice to the judgment debtor employer that the LC will submit the ODA to the Tax Support Division of the EDD, which collects payroll tax, as a notice of potential tax fraud. The notice to the EDD is an important flag that there may be tax issues with the employer, either from failure to pay wages or misclassification of workers. This bill gives the LC a powerful deterrent for employers who fail to pay outstanding wage theft judgments in a timely fashion, ensuring that the state does not continue to lose out on expected revenue and workers no longer have to continue waiting for the pay they have earned."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. Costs of approximately $4 million in the first year and $3.7 annually thereafter to the LC to issue and enforce citations against non-compliant employers (Labor Enforcement and Compliance Fund). Costs may be minimally offset by penalty revenue.
2. Minor and absorbable costs to EDD to receive notices about non-compliant employers from the LC. EDD notes that this bill does not require EDD to investigate a non-compliant employer, so EDD does not anticipate related enforcement costs.
3. Possible payroll tax revenue gain of an unknown amount, to the extent EDD identifies tax fraud by a non-compliant employer and recovers uncollected tax revenues (special fund).

VOTES

SENATE FLOOR: 38-0-2

YES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

ABS, ABST OR NV: Limón, Reyes

ASM LABOR AND EMPLOYMENT: 7-0-0

YES: Ortega, Flora, Chen, Elhawary, Kalra, Lee, Ward

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Sanchez, Arambula, Calderon, Caloza, Dixon, Elhawary, Fong, Mark González, Ahrens, Pacheco, Pellerin, Solache, Ta, Tangipa

UPDATED

VERSION: June 26, 2025

CONSULTANT: Erin Hickey / L. & E. / (916) 319-2091 FN: 0001404

1. Rutgers School of Management and Labor Relations, May 2024, "Wage Theft in California: Minimum Wage Violations, 2014-2023." https://smlr.rutgers.edu/sites/default/files/Documents/Centers/WJL/California_MinimumWage_Study_May2024.pdf ↑

Date of Hearing: August 20, 2025

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 355

Author:(Pérez) – As Amended Ver:June 26, 2025

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

SUMMARY:

This bill requires a judgment debtor employer to provide documentation to the Labor Commissioner (LC) confirming payment of the judgment and requires the LC to report a non-compliant employer to the Employment Development Department (EDD).

Specifically, this bill:

1. Requires a judgment debtor employer to provide documentation to the LC, within 60 days of a final judgment being entered against an employer requiring payment to an employee or to the state, that: (a) a judgment is fully satisfied, (b) a bond has been posted, or (c) an installment payment agreement has been entered.
2. Makes a judgement debtor employer that fails to comply with the documentation requirement liable for a $2,500 civil penalty via a citation issued by the LC.
3. Requires the LC to provide an employer that has not submitted documentation with written notice that: (a) the LC will submit the unsatisfied judgment to EDD as a notice of potential tax fraud, and (b) the civil penalty is due within 90 days. If an employer neither submits documentation nor pays the civil penalty within 90 days of receiving the LC’s notice, the LC must provide EDD with a notice that includes a summary of the final judgment and identifying information of the liable entities.

FISCAL EFFECT:

1. Costs of approximately $4 million in the first year and $3.7 annually thereafter to the LC to issue and enforce citations against non-compliant employers (Labor Enforcement and Compliance Fund). Costs may be minimally offset by penalty revenue.
2. Minor and absorbable costs to EDD to receive notices about non-compliant employers from the LC. EDD notes that this bill does not require EDD to investigate a non-compliant employer, so EDD does not anticipate related enforcement costs.
3. Possible payroll tax revenue gain of an unknown amount, to the extent EDD identifies tax fraud by a non-compliant employer and recovers uncollected tax revenues (special fund).

COMMENTS:

1. Purpose. According to the author:

SB 355 is a critical step in holding wage-theft/tax evaders accountable. Despite existing laws, unscrupulous employers continue to withhold wages and evade tax obligations, thus harming workers, law-abiding businesses, and the state’s tax base. This bill strengthens enforcement by ensuring that employers who refuse to pay wage theft judgments face real consequences – including increased coordination between [EDD] and the [LC] for tax fraud investigations.

This bill is co-sponsored by the California Federation of Labor Unions and the Sheet Metal, Air, Rail, and Transportation Workers, Local 105, and supported by other labor organizations and social justice groups.

1. Background. Wage Theft. A May 2024 study by the Rutgers School of Management and Labor Relations found that California workers lose more than $2.3 billion to $4.6 billion each year due to wage theft. In California, a worker may bring a claim against an employer for unpaid wages through the LC or a civil court action. However, even when a worker prevails in a wage theft claim, the worker is often not successful in recovering the stolen money. A 2020 Legislative Analyst’s Office report found that less than half of workers awarded unpaid wages were able to collect any amount of the award from the employer.

Labor Code Section 238. SB 588 (De León), Chapter 803, Statutes of 2015, established Labor Code Section 238, which requires an employer with an unsatisfied final judgment for non-payment of wages to cease business operations in California after 30 days unless the employer obtains a surety bond or reaches an accord with the unpaid worker. An employer that conducts business in violation of Section 238 is subject to a civil penalty of $2,500 or more. The LC may also issue a stop work order against an employer or file a lien against the employer’s real property or personal property.

This bill requires an employer with an unsatisfied final judgment for non-payment of wages to provide documentation to the LC, within 60 days of a final judgment being entered against an employer, that the judgment is fully satisfied or the employer has posted a bond or entered into a payment plan as required by Labor Code Section 238. This bill also imposes an additional $2,500 penalty on an employer that fails to provide such documentation to the LC and requires the LC to notify EDD that the employer may be committing tax fraud. EDD administers state payroll taxes, including an employer’s obligation to pay Unemployment Insurance Tax and Employment Training Tax.

1. Related Legislation. SB 261 (Wahab) requires the LC to post information on its website about an employer with an unsatisfied order, decision, or award and subjects an employer with an unsatisfied final judgement to a civil penalty. SB 261 is pending hearing in this committee.

AB 485 (Ortega) requires a state agency to deny the license or permit of an employer subject to an unsatisfied final judgment for non-payment of wages. AB 485 is pending hearing in the Senate Appropriations Committee.

AB 1234 (Ortega) modifies the LC’s wage claim process to allow an entry of default judgment if an employer fails to respond within a certain time frame and impose an additional administrative fee on the amount owed by an employer. AB 1234 is pending hearing in the Senate Appropriations Committee.

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

Date of Hearing: June 25, 2025

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Liz Ortega, Chair

SBPCA Bill Id:SB 355

Author:(Pérez) – As Amended Ver:April 2, 2025

SENATE VOTE: 38-0

SUBJECT: Judgment debtor employers: Employment Development Department

SUMMARY: Requires an employer with a final wage theft judgment to provide, within specified timelines, documentation to the Labor Commissioner (LC) that the judgment is fully satisfied or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed; and subjects a judgment debtor employer that fails to comply to a civil penalty, as well as requires the LC to notify the Tax Support Division of the Employment Development Department (EDD) of the employer’s unsatisfied judgment as a notice of potential tax fraud. Specifically, this bill:

1. Requires a judgment debtor employer, within 60 days of a final judgment being entered against an employer requiring payment to an employee or to the state pursuant to existing law, to provide documentation to the LC that any of the following are true:
   1. The judgment is fully satisfied.
   2. The required bond has been posted (see (3) below in existing law).
   3. The judgment debtor has entered into an agreement for the judgment to be paid in installments pursuant to existing law (see (3) below in existing law) and is in compliance with that agreement.
2. Requires a judgment debtor employer who fails to comply with (1) above to be liable for a civil penalty of $2,500.
3. Requires, if a judgment debtor employer does not comply with (1) above, the LC to, no later than 30 days from the passage of the deadline set forth in (1) above, provide written notice to the judgment debtor employer that the LC will submit the unsatisfied judgment to the Tax Support Division of the EDD as a notice of potential tax fraud.
4. Requires the LC to provide the written notice required by (3) above by first-class mail at the last known address of the judgment debtor employer listed with the LC.
5. Requires, if the judgment debtor employer does not comply with (1) above and pay the civil penalty prescribed by (2) above within 90 days from the date of the notice required by (3) above, the LC to, within 30 days, provide to the EDD a notice that includes both of the following:
   1. A summary of the final judgment.
   2. The names and identifying information of the persons or entities liable for payment of the judgment, including social security numbers, taxpayer identification numbers, and addresses.

EXISTING LAW:

1. Establishes the Division of Labor Standards Enforcement (DLSE), under the direction of the LC, within the Department of Industrial Relations (DIR) and sets forth its powers and duties regarding the enforcement of labor laws. Labor Code § 79 et seq.
2. Authorizes the LC to investigate employee complaints and to provide for a hearing in any action to recover wages, penalties, and other demands for compensation, as specified. Labor Code § 98.
3. Prohibits an employer with a final judgment for nonpayment of wages that remains unsatisfied after a period of 30 days after the time to appeal therefrom has expired and no appeal therefrom is pending from continuing to conduct business in California, unless that employer has obtained a bond from a surety company and filed that bond with the LC, as prescribed, or reached an accord with an individual holding an unsatisfied final judgment, and subjects an employer in violation of this provision to a civil penalty. Labor Code § 238.
4. Establishes the EDD and grants it the powers and duties necessary to administer the reporting, collection, refunding to the employer, and enforcement of taxes required to be withheld by employers, as specified. Unemployment Insurance Code § 301 et seq.
5. Requires an employer who pays wages to a resident employee for services performed either within or without this state, or to a nonresident employee for services performed in this state, to deduct and withhold from those wages a sum which is substantially equivalent to the amount of tax reasonably estimated to be due under the Personal Income Tax Law resulting from the inclusion in the gross income of the employee of the wages which were subject to withholding. Unemployment Insurance Code § 13020 et seq.

FISCAL EFFECT: According to the Senate Appropriations Committee:

• The DIR indicates that it would incur first-year costs of $1.37 million, and $1.44 million annually thereafter, to implement the provisions of the bill (Labor Enforcement and Compliance Fund).
• EDD’s administrative costs are unknown, and would depend, among other factors, on the number of notices received from DIR. As currently drafted, EDD is unclear whether it would be required to investigate every notice received (See Staff Comments).
• This bill could result in an increase in penalty revenue to the State. The annual magnitude is unknown.

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

Wage theft is the most prevalent type of theft in the country, causing more economic loss than all other types of theft combined. Recent studies estimate that California workers lose more than $2.3 to $4.6 billion in stolen wages each year.^[1] In California, workers can bring wage claims either through the LC or through a civil action in court.

However, even when workers prevail in their wage theft claims, they are more often than not unsuccessful in recovering the stolen money. A 2024 California State Auditor Report found that, between 2018 and 2023, the LC’s Judgment Enforcement Unit was successful in collecting the entire amount owed in just 12 percent of the cases that were referred to the state for enforcement. A 2020 Legislative Analyst’s Office report found that, for workers who filed wage claims in 2017, less than half who received an award for unpaid wages were able to collect any wages at all from their employer.

Existing law requires employers with unpaid wage theft judgments to cease business operations unless they have obtained a surety bond or reached an accord with an individual holding an unsatisfied final judgment. If an employer violates this requirement, they are subject to a civil penalty and the LC can file a lien on the employer’s personal and real property, as well as issue a stop work order.

California state payroll taxes and the EDD:

Wages in California are generally subject to all four of the state’s payroll taxes:

• Unemployment Insurance and Employment Training Tax are employer contributions and each have a taxable wage limit of $7,000 per employee, per calendar year.
• State Disability Insurance and Personal Income Tax are withheld from employees’ wages and do not have a taxable wage limit, meaning that the tax is applied to all wages earned by an employee.

The EDD’s Tax Branch works with employers to ensure that necessary payroll taxes and information are reported promptly and accurately, as well as verifies the reporting of wages and enforces the timely payment of taxes.

Committee Comments:

To clarify the responsibilities of the judgment debtor employer and LC, Committee staff recommend that, subsequent to this Committee, the author amend the bill language in the following ways:

• (b) A judgment debtor employer who fails to comply with subdivision (a) shall be liable for a civil penalty of two thousand five hundred dollars ($2,500) in a citation issued by the Labor Commissioner.
• (c) (1) If a judgment debtor employer does not comply with subdivision (a), the Labor Commissioner shall, no later than 30 days from the passage of the deadline set forth in subdivision (a), provide written notice to the judgment debtor employer that the Labor Commissioner will submit the unsatisfied judgment to the Tax Support Division of the Employment Development Department as a notice of potential tax fraud and that the civil penalty prescribed by subdivision (b) is due within 90 days of the notice prescribed by this subdivision.
• (d) If the judgment debtor employer does not both comply with subdivision (a) and pay the civil penalty prescribed by subdivision (b) within 90 days from the date of the notice required by subdivision (c), the Labor Commissioner shall, within 30 days, provide to the Employment Development Department a notice…

Arguments in Support

A coalition of labor unions and workers’ rights organizations state in support that “SB 355 provides the LC with new enforcement tools to address the failure to pay wage judgments. First, it requires employers who have an outstanding Order, Decision or Award (ODA) to notify the LC if they have already paid the judgment, have posted bond, or have entered into an agreement to pay, after 60 days of an ODA becoming final. This simple requirement will clear up many cases that are already closed and are creating backlogs at the LC, saving the agency valuable resources.

Secondly, when an employer fails to pay an order, decision, or award for wage theft to a worker, it authorizes the LC to provide written notice to the judgment debtor employer that the LC will submit the ODA to the Tax Support Division of the EDD, which collects payroll tax, as a notice of potential tax fraud. The notice to the EDD is an important flag that there may be tax issues with the employer, either from failure to pay wages or misclassification of workers. This bill gives the LC a powerful deterrent for employers who fail to pay outstanding wage theft judgments in a timely fashion, ensuring that the state does not continue to lose out on expected revenue and workers no longer have to continue waiting for the pay they have earned.”

Arguments in Opposition

None on file.

Prior and Related Legislation

SB 261 (Wahab) of 2025 would, among other things, require the LC to post a copy of the ODA on the division’s internet website, as specified, no later than 15 days after the time to appeal from the ODA has expired and no appeal therefrom is pending; additionally the bill would require the DLSE to post on its website specified information about any employer with an unsatisfied ODA; the bill would also would additionally require the employer to be subject to a civil penalty not to exceed three times the outstanding judgment amount if a final judgment against an employer arising from the employer’s nonpayment of work performed in this state remains unsatisfied after a period of 180 days. This measure is pending before this Committee.

SB 310 (Wiener) of 2025 would authorize workers to recover penalties for lost wages through an independent civil action. This measure was ordered to the inactive file at the request of the author.

AB 485 (Ortega) of 2025 would require state agencies to deny a new license or permit, or the renewal of an existing license or permit, for employers that have outstanding wage theft judgments. This measure is pending before the Senate Labor, Public Employment and Retirement Committee.

AB 1234 (Ortega) of 2025 would require, among other things, the DLSE to promptly notify employers when a worker files a wage claim and requires a full response in a reasonable amount of time; the bill also allows the DLSE to issue an ODA based on the worker’s claim if the employer fails to respond or appear; it additionally adds procedural requirements for employers that challenge claims, including requiring documentation of specific facts and evidence for disputes over the amount of the claim. This measure is pending before the Senate Labor, Public Employment and Retirement Committee.

SB 588 (De León), Chapter 803, Statutes of 2015, allows the LC to file a lien or levy on an employer’s property in order to assist the employee in collecting unpaid wages when there is a judgment against the employer; additionally requires that, if a final judgment against an employer arising from the employer’s nonpayment of wages for work performed in this state remains unsatisfied after a period of 30 days after the time to appeal therefrom has expired, the employer must cease business operations unless the employer has obtained a surety bond or provided the LC with a notarized copy of an accord reached with an individual holding an unsatisfied final judgment.

AB 469 (Swanson), Chapter 655, Statutes of 2011 made numerous changes related to wage theft, employee wage claims, and related provisions including subjecting an employer guilty of wage theft to paying restitution of wages to the employee, and extending the period within which the DLSE may commence a collection action, as defined, from one year to three years.

REGISTERED SUPPORT / OPPOSITION:

Support

California Federation of Labor Unions, AFL-CIO
California Immigrant Policy Center
California Nurses Association
California Rural Legal Assistance Foundation, INC.
California School Employees Association
California State Legislative Board of the Smart - Transportation Division
CFT - a Union of Educators & Classified Professionals, AFT, AFL-CIO
City of San Jose
Pilipino Workers Center
SEIU California State Council
Sheet Metal Workers' Local Union No. 104 (SMART)
Sheet Metal, Air, Rail, and Transportation Workers, Local 105
Transport Workers Union of America, AFL-CIO
UFCW - Western States Council
Worksafe

Analysis Prepared by: Erin Hickey / L. & E. /

1. Rutgers School of Management and Labor Relations, May 2024, “Wage Theft in California: Minimum Wage Violations, 2014-2023.” https://smlr.rutgers.edu/sites/default/files/Documents/Centers/WJL/California_MinimumWage_Study_May2024.pdf ↑

 THIRD READING  

Bill No: SB 355

Author: Pérez (D), et al.

Amended: 4/2/25

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 4/9/25

AYES: Smallwood-Cuevas, Strickland, Cortese, Durazo, Laird

SENATE JUDICIARY COMMITTEE: 13-0, 4/29/25

AYES: Umberg, Niello, Allen, Arreguín, Ashby, Caballero, Durazo, Laird, Stern, Valladares, Wahab, Weber Pierson, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/23/25

AYES: Caballero, Seyarto, Cabaldon, Grayson, Richardson, Wahab

NO VOTE RECORDED: Dahle

SUBJECT: Judgment debtor employers: Employment Development Department

SOURCE: California Federation of Labor Unions, AFL-CIO

Sheet Metal, Air, Rail, and Transportation Workers Local 105

DIGEST:

This bill 1) requires employers with unsatisfied judgments for owed wages to provide documentation to the Labor Commissioner (LC) that the judgment is fully satisfied or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed; 2) subjects the judgment debtor employer to a civil penalty for violations; and 3) requires the LC to notify the Tax Support Division of the Employment Development Department of unsatisfied judgments as a notice of potential tax fraud.

ANALYSIS:

Existing law:

1. Establishes within the Department of Industrial Relations (DIR), various entities including the Division of Labor Standards Enforcement (DLSE) under the direction of the 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)
2. Establishes a citation process for the LC to enforce violations of the minimum wage that includes, among others, the following procedural requirements:
   1. A citation issued to an employer, as specified.
   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.
   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. 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.
   5. 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.)
3. Requires the LC, within 15 days after the hearing is concluded, to file in the office of the division a copy of the order, decision, or award (ODA). The ODA shall include a summary of the hearing and the reasons for the decision. Additionally, the ODA includes any sums found owing, damages proved, and any penalties awarded pursuant to the Labor Code, including interest on all due and unpaid wages, as specified. (Labor Code §98.1)
4. Requires, upon filing of the ODA, requires the LC to:
   1. Serve a copy of the decision personally, by first-class mail, or in the manner specified in Section 415.20 of the Code of Civil Procedure on the parties.
   2. Advise the parties of their right to appeal the decision or award and further advise the parties that failure to do so within 10 days shall result in the decision or award becoming final and enforceable as a judgment by the superior court. (Labor Code §98.1 and §98.2)
5. Provides that if a final judgment against an employer arising from the employer’s nonpayment of wages for work performed in this state remains unsatisfied after a period of 30 days after the time to appeal therefrom has expired and no appeal therefrom is pending, the employer shall not continue to conduct business in this state, as specified, unless the employer has obtained a bond from a surety company and has filed a copy of that bond with the Labor Commissioner. The bond shall be effective and maintained until satisfaction of all judgments for nonpayment of wages. The principal sum of the bond shall not be less than the following:
   1. Fifty thousand dollars ($50,000) if the unsatisfied portion of the judgment is no more than five thousand dollars ($5,000).
   2. One hundred thousand dollars ($100,000) if the unsatisfied portion of the judgment is more than five thousand dollars ($5,000) and no more than ten thousand dollars ($10,000).
   3. One hundred fifty thousand dollars ($150,000) if the unsatisfied portion of the judgment is more than ten thousand dollars ($10,000).

(Labor Code §238)

1. Specifies that if no appeal of the ODA is filed within the period specified, the ODA shall, in the absence of fraud, be deemed the final order. Existing law then requires the LC to file, within 10 days of the ODA becoming final, a certified copy of the final order with the clerk of the superior court of the appropriate county unless a settlement has been reached by the parties and approved by the LC. Judgment shall be entered immediately by the court clerk in conformity therewith. (Labor Code §98.2)
2. Requires, in order to ensure that judgments are satisfied, authorizes the LC to serve upon the judgment debtor, personally or by first-class mail at the last known address of the judgment debtor listed with the division, a form, as specified, to assist in identifying the nature and location of any assets of the judgment debtor. Requires the judgment debtor to complete the form and cause it to be delivered to the division within 35 days, unless the judgment has been satisfied. (Labor Code §98.2)
3. Provides that in case of willful failure by the judgment debtor to comply with a final judgment, the division or the judgment creditor may request the court to apply the sanctions provided in Section 708.170 of the Code of Civil Procedure including an order requiring a person to appear before the court. Failure to appear can result in a warrant to have the person brought before the court to answer for the failure to appear. (Labor Code §98.2)
4. Requires the LC to make every reasonable effort to ensure that judgments are satisfied, including taking all appropriate legal action. (Labor Code §98.2)
5. Authorizes, until January 1, 2029, a public prosecutor to prosecute an action, either civil or criminal, for a violation of certain provisions of the labor code or to enforce those provisions independently. (Labor Code §181)
6. Establishes the Employment Development Department (EDD) within the Labor and Workforce Development Agency. EDD is responsible for, among other duties, the collection of payroll taxes from employers in the following four categories: Unemployment Insurance Tax; Employment Training Tax; State Disability Insurance Tax; and California Personal Income Tax. EDD’s Tax Branch works with employers to ensure that necessary payroll taxes and information are reported promptly and accurately to the department. (Unemployment Insurance Code §301 et seq.)

This bill:

1. Requires a judgment debtor employer, within 60 days of a final judgment being entered against an employer requiring payment to an employee or the state pursuant to existing law, to provide documentation to the Labor Commissioner that any of the following are true:
   1. The judgment is fully satisfied.
   2. The bond required by subdivision (a) of Section 238 has been posted.
   3. The judgment debtor has entered into an agreement for the judgment to be paid in installments pursuant to subdivision (b) of Section 238 and is in compliance with that agreement.
2. Subjects a judgment debtor employer who fails to comply with the above provisions liable for a civil penalty of two thousand five hundred dollars ($2,500).
3. Requires the LC, if a judgment debtor employer does not comply with the provisions specified in (1) above within the stipulated timeline, to, no later than 30 days from the passage of the 60 days, provide written notice to the judgment debtor employer that the LC will submit the unsatisfied judgment to the Tax Support Division of the EDD as a notice of potential tax fraud.
4. If the judgment debtor employer does not comply with the provisions specified in (1) above and pay the civil penalty prescribed by (2) within 90 days from the date of the written notice required by (3), then requires the Labor Commissioner to, within 30 days, provide to the EDD a notice that includes both of the following:
   1. A summary of the final judgment.
   2. The names and identifying information of the persons or entities liable for payment of the judgment, including social security numbers, taxpayer identification numbers, and addresses.

Background

Data on Wage Theft. 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.

State Auditor Report on the Labor Commissioner’s Office. In May 29, 2024, the California State Auditor released a report summarizing the findings of an audit of the Division of Labor Standards Enforcement. Among other things, the report found:

• The LC’s office often takes two years or longer to process wage claims, with a median of 854 days to issue a decision (more than six times longer than the law allows).
• The DLSE’s Enforcement Unit’s work results in only a small percentage of successful payment to workers. Between January 2018 and November 2023, about 28% of employers did not make LC‑ordered payments. The LC consequently obtained judgments against those employers. In roughly 24% of judgments during that time, or about 5,000 cases, the workers referred their judgments to the Enforcement Unit. The unit successfully collected the entire judgment amount in only 12% of those judgments, or in about 600 cases.

Employment Development Department Payroll Tax Collection. California’s Employment Development Department administers the State’s payroll tax programs and is one of the largest tax collection agencies in the nation. EDD’s Tax Branch administers the following payroll tax programs and works with employers to ensure that payroll taxes are reported promptly and accurately: Unemployment Insurance (UI), Employment Training Tax (ETT), State Disability Insurance (SDI), and Personal Income Tax (PIT) Withholding.

Failure by employers to pay their workers and their state tax responsibilities contributes to the underground economy. As noted by EDD, when businesses operate in the underground economy, they illegally reduce the amount of money used for insurance, payroll taxes, licenses, employee benefits, safety equipment, and safety conditions. These types of employers then gain an unfair competitive advantage over businesses that comply with the various business laws. This causes unfair competition in the marketplace and forces law-abiding businesses to pay higher taxes and expenses.^[3]

Need for this bill?. According to the author: “Current enforcement mechanisms lack sufficient deterrents, allowing employers to treat wage theft as a calculated risk. They face very few tangible or immediate consequences for noncompliance, enabling them to deny claims, delay payments, or refuse payments altogether. SB 355 supports California workers who have been victims of wage theft by providing the Labor Commissioner’s Office (LCO) with a new enforcement tool by authorizing the LCO to submit a notice of an unpaid wage theft claim to the Tax Support Division of the EDD as potential tax fraud.”

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

Related/Prior Legislation

SB 261 (Wahab, 2025) aims to recover unpaid wages owed to workers by, among other things, requiring the DLSE to post on its internet website specified information of any employer with an unsatisfied ODA on a claim for unpaid wages, as specified, and subjecting, for final judgments unsatisfied after a period of 180 days, the employer to a civil penalty not to exceed three times the outstanding judgment amount.

SB 310 (Wiener, 2025) would permit the penalty for failure to pay wages owed to employees to be recovered through an independent civil action, as specified.

AB 485 (Ortega, 2025) would require state agencies to deny a new license or permit, or the renewal of an existing license or permit, for employers that have outstanding wage theft judgments and have not obtained a surety bond or reached an accord with the affected employee to satisfy the judgment.

AB 1234 (Ortega, 2025) would, among other things, revise and recast the provisions relating to the process for the LC to investigate, hold a hearing, and make determinations relating to an employee’s complaint of wage theft. Among other things, the bill would impose an administrative fee payable in the amount of 30% of the ODA to be deposited into the Wage Recovery Fund, created by the bill, and appropriated to compensate the LC for the staffing required to investigate and recover wages and penalties owed to aggrieved employees.

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

According to the Senate Appropriations Committee:

• The Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $1.37 million, and $1.44 million annually thereafter, to implement the provisions of the bill (Labor Enforcement and Compliance Fund).
• EDD’s administrative costs are unknown, and would depend, among other factors, on the number of notices received from DIR. As currently drafted, EDD is unclear whether it would be required to investigate every notice received (See Staff Comments).
• This bill could result in an increase in penalty revenue to the State. The annual magnitude is unknown.

SUPPORT: (Verified 5/23/25)

California Federation of Labor Unions, AFL-CIO (co-source)

Sheet Metal, Air, Rail, and Transportation Workers Local 105 (co-source)

California Federation of Teachers

California Nurses Association

California Rural Legal Assistance Foundation

California School Employees Association

California State Legislative Board of the SMART – Transportation Division

City of San Jose

Pilipino Workers Center

Service Employees International Union, California State Council

Transport Workers Union of America, AFL-CIO

United Food and Commercial Workers, Western States Council

Worksafe

OPPOSITION: (Verified 5/23/25)

None received

ARGUMENTS IN SUPPORT:

According to the sponsors:

“Current enforcement mechanisms lack sufficient deterrents, enabling employers to treat wage theft as a calculated risk, knowing that they face very few tangible or immediate consequences for noncompliance when the status quo allows them to deny claims, delay payments, or refuse payments altogether... The notice to the EDD is an important flag that there may be tax issues with the employer, either from failure to pay wages or misclassification of workers. This bill gives the LCO a powerful deterrent for employers who fail to pay outstanding wage theft judgments in a timely fashion, ensuring that the state does not continue to lose out

on expected revenue and workers no longer have to continue waiting for the pay they have earned.”

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

5/25/25 16:15:06

**** 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. Ibid ↑

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2025 - 2026 Regular Session

SB 355 (Pérez) - Judgment debtor employers: Employment Development Department

Bill Summary:

SB 355 would (1) require employers with unsatisfied judgments for owed wages to provide, within specified timelines, documentation to the Labor Commissioner (LC) that the judgment is fully satisfied or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed, (2) subject the judgment debtor employer to a civil penalty for violations, and (3) require the LC to notify the Tax Support Division of the Employment Development Department (EDD) of unsatisfied judgments as a notice of potential tax fraud.

Fiscal Impact:

• The Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $1.37 million, and $1.44 million annually thereafter, to implement the provisions of the bill (Labor Enforcement and Compliance Fund).
• EDD’s administrative costs are unknown, and would depend, among other factors, on the number of notices received from DIR. As currently drafted, EDD is unclear whether it would be required to investigate every notice received (See Staff Comments).
• This bill could result in an increase in penalty revenue to the State. The annual magnitude is unknown.

Background:

Wage theft is the failure of an employer to pay wages due to an employee. Wage theft affects low-wage workers disproportionately, and captures many labor law violations, including the minimum wage, overtime, denied meal periods, and/or misclassification of employees as independent contractors.

Under current law, a worker may file a wage theft claim with DIR’s Division of Labor Standards Enforcement (DLSE), headed by the LC. The LC is then tasked with resolving wage theft claims by investigating, facilitating a resolution with the worker and employee, and holding a hearing when necessary. In some cases, claims may go directly to civil litigation, skipping the settlement conference and hearing steps.

Once the LC issues an ODA, the employer has a limited time after service of the LC decision to file an appeal. If no appeal is filed within the specified period, the LC must file a certified copy of the decision with the appropriate Superior Court and obtain a judgment against the employer for the amount owed. When the LC does request that the court enter the judgment against the employer, the worker can choose the option of referring the judgment to the LC’s Enforcement Unit for collection or pursue collection on their own or through the use of an external partner, such as a private attorney or advocacy groups.

DLSE’s Enforcement Unit can use a variety of means to collect judgment amounts, including levies against employers’ bank accounts and liens on properties. Additionally, DLSE calculates interest accrued on any outstanding judgment amounts for collection purposes.

Existing law prescribes specified number of days (with a maximum of 135) for each step in the wage theft adjudication process. The timeline under which DLSE is required to respond to a wage theft claim is as follows:

• 30 days from claim submission to gather information and determine if a hearing is necessary or takes no further action and notifies parties.
• Hold a hearing within 90 days of determination that a hearing is necessary.
• Within 15 days after the hearing is concluded, file an order, decision, or award.
• Within 10 days of service of an ODA, parties can appeal or the LC files the ODA with the appropriate Superior Court and the court issues a judgment against the employer.

In May 2024, the California State Auditor released a report summarizing the findings of a DLSE audit. The Auditor reviewed the backlog of wage claims submitted by workers from 2018 to November 2023, and concluded that the LC is not providing timely adjudication of wage claims for workers primarily because of insufficient staffing to process those claims. The backlog of grew from 22,000 at the end of 2017–18 to 47,000 at the end of 2022–23. As of November 1, 2023, more than 2,800 claims had been open for five years or more, reflecting $64 million in unpaid wages. Among other things, the report found:

• The LC often takes two years or longer to process wage claims, with a median of 854 days to issue a decision (more than six times longer than the law allows).
• Field offices have insufficient staffing to process wage claims with vacancy rates equal to or greater than 10 percent, and 13 field offices with vacancy rates greater than 30 percent. The Auditor estimates that the LC’s office needs hundreds of additional positions to resolve its backlog. Contributing to the high vacancy rate is an ineffective and lengthy hiring process and non-competitive salaries.
• DLSE’s Enforcement Unit’s work results in only a small percentage of successful payment to workers. Between January 2018 and November 2023, about 28 percent of employers did not make LC ordered payments. The LC consequently obtained judgments against those employers. In roughly 24 percent of judgments during that time, or about 5,000 cases, the workers referred their judgments to the Enforcement Unit. The unit successfully collected the entire judgment amount in only 12 percent of those judgments, or in about 600 cases.

EDD administers the State’s payroll tax programs and is one of the largest tax collection agencies in the nation. EDD’s Tax Branch administers the following payroll tax programs and works with employers to ensure that payroll taxes are reported promptly and accurately: (1) Unemployment Insurance (UI), (2) Employment Training Tax (ETT), (3) State Disability Insurance (SDI), and (4) Personal Income Tax (PIT) Withholding.

EDD data indicate that in 2018-19, its Tax Branch collected more than $81 billion in payroll taxes, including $68 billion in PIT withholdings. EDD is also tasked with maintaining wage records for more than 18.5 million workers, including verifying the reporting of wages and ensuring accurate reporting of taxes.

Failure by employers to pay their workers and their state tax responsibilities contributes to the underground economy, a term referring to to people and businesses that deal in cash or use other schemes to hide their activities and their true tax liability from government licensing, regulatory, and taxing agencies. The underground economy is also known as tax evasion, tax fraud, cash pay, tax gap, payments under-the-table, and off-the-books.

EDD notes that the actual size of the underground economy is difficult to measure. In September of 2019, the Internal Revenue Service released a new set of tax gap estimates for the period year 2011-2013. The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time. After adjusting for audit and collection activities, the IRS estimates that in 2011-2013 the net national tax gap was approximately $381 billion.

As noted by EDD, when businesses operate in the underground economy, they illegally reduce the amount of money used for insurance, payroll taxes, licenses, employee benefits, safety equipment, and safety conditions. These types of employers then gain an unfair competitive advantage over businesses that comply with the various business laws. This causes unfair competition in the marketplace and forces law-abiding businesses to pay higher taxes and expenses.

California has taken aggressive efforts to target the underground economy, including with the creation of the Joint Enforcement Strike Force, with membership from various state departments including, among others, the Franchise Tax Board and DIR, with the mission of reducing unfair business competition and protecting the rights of workers. Among other things, the Strike Force is tasked with coordinating the joint enforcement of tax, labor, and licensing laws as well as finding and deterring payroll tax violations, including unreported or unpaid payroll tax deductions.

Proposed Law:

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

• Require the judgment debtor employer, within 60 days of a final judgment being entered against an employer requiring payment to an employee or the State pursuant to existing law, to provide documentation to the LC that any of the following are true: (1) the judgment is fully satisfied, (2) the specified required bond has been posted, or (3) the judgment debtor has entered into an agreement for the judgment to be paid in installments, as specified, and is in compliance with that agreement.
• Subject a judgment debtor employer who fails to comply with the above provisions liable for a civil penalty of $2,500.
• Require the LC, if a judgment debtor employer does not comply with the provisions specified above within the stipulated timeline, to, no later than 30 days from the passage of the 60 days, provide written notice to the judgment debtor employer that the LC will submit the unsatisfied judgment to the Tax Support Division of the EDD as a notice of potential tax fraud.
• Require the LC, under specified conditions, within 30 days, to provide to EDD a notice that includes both of the following: (1) a summary of the final judgment, and (2) the names and identifying information of the persons or entities liable for payment of the judgment, including social security numbers, taxpayer identification numbers, and addresses.

Related Legislation:

• SB 261 (Wahab) would attempt to recover unpaid wages owed to workers by (1) requiring the LC to post a copy of an order, decision, or award (ODA) on a claim for unpaid wages on its internet site, (2) prescribing when a posting can be removed, (3) requiring notification by certified mail to employers prior to the posting of an ODA, (4) subjecting, for final judgments unsatisfied after a period of 180 days, the employer to a civil penalty not to exceed three times the outstanding judgment amount, and (5) authorizing the LC to adopt regulations and rules of practice and procedures to enforce these provisions. The bill is currently pending in this Committee.
• SB 310 (Wiener) would permit the penalty for failure to pay wages owed to employees to be recovered through an independent civil action, as specified. The bill is currently pending in this Committee.
• AB 485 (Ortega) would require state agencies to deny a new license or permit, or the renewal of an existing license or permit, for employers that have outstanding wage theft judgments and have not obtained a surety bond or reached an accord with the affected employee to satisfy the judgment. The bill is currently pending in the Assembly Appropriations Committee.
• AB 1234 (Ortega) would, among other things, revise and recast the provisions relating to the process for the LC to investigate, hold a hearing, and make determinations relating to an employee’s complaint of wage theft. Among other things, the bill would impose an administrative fee payable in the amount of 30 percent of the ODA to be deposited into the Wage Recovery Fund, created by the bill, and appropriated to compensate the LC for the staffing required to investigate and recover wages and penalties owed to aggrieved employees. AB 1234 is pending in Assembly Appropriations Committee.
• AB 594 (Maienschein, Chapter 659, Statutes of 2023), until January 1, 2029, clarified and expanded public prosecutors’ authority to enforce the violation of specified labor laws through civil or criminal actions without specific authorization from the DLSE.

Staff Comments: As noted previously, this bill would require DIR to notify EDD’s Tax Support Division regarding specified unsatisfied judgments for owed wages. As currently drafted, however, the bill does not specifically require EDD to take action with this information. Consequently, EDD has yet to determine administrative costs from this portion of the bill. Additionally, to the extent that EDD were to identify tax fraud with the information provided, revenues to the State could increase. The magnitude is unknown.

-- END --

SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2025-2026 Regular Session

Bill No: SB 355 (Author:Pérez)

Version: April 2, 2025

Hearing Date: April 29, 2025

Fiscal: Yes

Urgency: No

Consultant: ID

SUBJECT

Judgment debtor employers: Employment Development Department

DIGEST

This bill requires an employer with a final judgment for a labor law violation to provide the Labor Commissioner specified documentation regarding their compliance with that judgment within 60 days of the entry of judgment, or be subject to a civil penalty and notice to the Employment Development Department regarding the judgment.

EXECUTIVE SUMMARY

The violation of California’s labor laws is a significant issue throughout the state. Additionally, even when employers are found to have violated the law and ordered to pay damages and penalties for that violation, workers often have difficulty collecting the judgment. When an employee believes their employer has violated the labor laws, they may file a complaint with the Labor Commissioner (LCO). The LCO may hold a hearing regarding the complaint, and if it does, it must issue an order, decision, or award regarding the complaint within 15 days of the hearing. Parties to the case may then appeal the LCO’s decision within 10 days. If no appeal is filed, the decision becomes final, and will be entered into the superior court to become a final judgment. The LCO has a variety of tools, such as issuing liens and additional penalties, to enforce final judgments and make an employer pay. However, in many cases, employers still do not pay their final judgments. SB 355 attempts to ensure greater compliance with final judgments of wage law violations by requiring employers with final judgments to file with the LCO specified documentation of their compliance with the judgment within 60 days of entry of judgment. If the employer fails to do so, SB 355 authorizes a civil penalty of $2,500, and authorizes the LCO to notify the Employment Development Department (EDD) of the judgment and the employer’s information. SB 355 is sponsored by the California Federation of Labor Unions, AFL-CIO and the Sheet Metal, Air, Rail and Transportation Workers’ Union, Local 104, and is supported by the California Rural Legal Assistance Foundation, California School Employees Association, CFT, and UFCW. The Committee has received no timely letters of opposition. SB 355 previously passed out of the Senate Labor, Public Employment, and Retirement Committee by a vote of 5 to 0.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Establishes within the Department of Industrial Relations (DIR) the Division of Labor Standards Enforcement (DLSE) under the direction of the LCO, and empowers the LCO to ensure a just day’s pay in every work place and to promote justice through the robust enforcement of labor law. Empowers the LCO to enforce, among other things, wage and hour law, anti-retaliation provisions, and employer notice requirements (Lab. Code §§ 79 et seq.)
2. 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. (Lab. Code §§ 200-2699.8.)
3. Authorizes the LCO to investigate employee complaints, conduct hearings, and issue orders, decisions, and awards regarding complaints. Requires that the LCO notify the parties within 30 days of the filing of a complaint whether a hearing will be held, the LCO will prosecute the case, or whether no further action will be taken. Requires that, if the LCO will hold a hearing, that the hearing be held within 90 days of the date of that determination, with the option of postponement as specified. Specifies required notice that the LCO must provide the parties regarding the complaint and the proceeding, and allows a defendant to file an answer within 10 days of service of the notice and complaint. (Lab. Code § 98.)
4. Requires that the LCO file their order, decision, or award within 15 days after the hearing, and requires that the LCO serve a copy of the decision on the parties. Requires that the LCO’s decision must notify the parties of their right to appeal, and that failing to appeal within the prescribed period for appeals will result in the decision becoming final. Specifies that all awards granted by the LCO pursuant to a hearing shall accrue interest, as specified. (Lab. Code § 98.1.)
5. Specifies that, within 10 days after the service of a notice of an order, decision, or award by the LCO, either party may appeal the decision to the superior court, which will hear the appeal de novo. Specifies that, if no notice of appeal is filed within the 10-day period, the order, decision, or award is deemed a final order. Specifies that, as a condition to appeal, an employer appealing the decision must post a bond with the court in the amount of the order, decision, or award. (Lab. Code § 98.2.)
6. Prohibits an employer from conducting business in the state when a final judgment for the employer’s nonpayment of wages remains unsatisfied for more than 30 days after the time for appeal has expired and no appeal is pending, unless the employer has obtained a bond or an accord for payment of the judgment, as specified. (Lab. Code § 238.)
7. Provides that an employer that conducts business in the state in violation of (6), above, is subject to a civil penalty of $2,500, and that an employer that has previously been assessed this penalty and failed to pay shall be subject to an additional penalty of $100 per each calendar day that the employer unlawfully conducts business in the state, not to exceed $100,000. (Lab. Code § 238(f).)

This bill:

1. Requires that, within 60 days of a final judgment being entered against an employer requiring the employer to pay an aggrieved employee or the LCO for a labor law violation, the judgment debtor employer provide the LCO with documentation of any of the following:
   1. That the judgment was fully satisfied;
   2. That a bond, as specified, has been posted; or
   3. That the employer or judgment debtor has entered into an agreement to pay the judgment in installment payments, and that they are in compliance with that agreement.
2. Specifies that a judgment debtor employer who fails to comply with (1), above, is liable for a civil penalty of $2,500.
3. Specifies that, if the employer or judgment debtor does not comply with (1), above, the LCO must mail by first class mail a notice to the judgment debtor employer within 30 days explaining that the LCO will submit the unsatisfied judgment to the Tax Support Division of the EDD as a notice of potential tax fraud.
4. Specifies that the LCO must mail this notice to the last known address of the judgment debtor listed with the LCO by first class mail.
5. Requires that, if the judgment debtor employer does not comply with (1), above, and pay the civil penalty provided for in (2), above, within 90 days of the notice, the LCO must provide the EDD a notice within 30 days. Specifies that this notice must include:
   1. A summary of the final judgment;
   2. The names and identifying information of the persons or entities liable for payment of the judgment, including social security numbers, taxpayer identification numbers, and addresses.

COMMENTS

1. Author’s statement

According to the author:

SB 355 is a critical step in holding wage-theft/tax evaders accountable. Despite existing laws, unscrupulous employers continue to withhold wages and evade tax obligations, thus harming workers, law-abiding businesses, and the state’s tax base. This bill strengthens enforcement by ensuring that employers who refuse to pay wage theft judgments face real consequences—including increased coordination between the Employment Development Department (EDD) and the Labor Commissioner’s Office for tax fraud investigations.

1. Wage theft is a major issue in California

California has some of the strongest protections across the country for workers and for ensuring they can be made whole when they are wronged by their employer. These laws include rules for a minimum wage, rest and meal breaks, overtime pay, and the timely payment of wages, and rules against retaliation for an employee asserting their rights. Many of California’s labor laws include statutory or civil penalties and fines for employers who violate them. These laws ensure that California’s workforce and economy are the strongest in the world and that workers’ rights, fair treatment and pay, and dignity are respected.

However, laws are only as good as the extent to which they are followed and enforced, and labor law violations continue to be a major problem across the state. A 2017 study found that 19.2% of low-wage workers experience minimum wage violations in California each year, with employers stealing almost two billion dollars from California workers every year though minimum wage violations.^[1] Another study found even higher losses for California workers: across three metropolitan areas covering Los Angeles, San Diego, and the Bay Area, employers were estimated to have stolen an average of 2.3 to 4.6 billion dollars in earned wages from workers each year between 2014 and 2023.^[2] Furthermore, the number of underpaid workers has more than doubled since 2014, with a dramatic increase of 56 percent from 2022 to 2023.^[3] This wage theft disproportionately affects African American, Latinx, noncitizen, and women workers. Given these statistics, wage theft remains a bigger problem of theft in California than all other forms of theft.^[4]

Despite these serious and pervasive violations of labor law, employees often are unable to obtain redress or recovery of stolen wages. The main public enforcement agency for the Labor Code, the Labor Commissioner (LCO), is chronically backlogged with cases. The LCO investigates employee complaints of labor law violations, hears and adjudicates claims, issues citations for violations of certain labor laws, and also prosecutes labor law violations on behalf of employees. However, the LCO has experienced chronic staffing and funding shortages for many years, resulting in cases taking 505 days to be adjudicated on average.^[5] A Legislative Analyst’s Office analysis found that about 33,000 workers file wage claims with the LCO every year, with workers reporting collecting less than 20 percent of unpaid wages owed.^[6] Moreover, the State Auditor found that, between 2018 and 2023, about 28 percent of employers liable for wage theft failed to make payments ordered by the LCO.^[7] With such long processing times in cases before the LCO and such low rates of recovery even after the LCO finds for the employee, many workers 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, minimum wage violations and worker misclassification, where an employer wrongly classifies a worker as an independent contractor instead, result in lost payroll and sales tax revenue for the state. A report from the UC Berkeley Labor Center found that worker misclassification and informal employment costs state and federal programs almost $3,000 per misclassified worker each year.^[8] Most importantly, those employees who have their wages stolen lose thousands of dollars every year, hurting their pocketbooks and livelihoods. Research has found that minimum wage violations in California contribute to a 22.9% increase in poverty rates among those affected.^[9] Thus, enforcement is essential to ensuring California’s strong labor laws actually protect workers and society from harm.

1. California has numerous wage laws and avenues for redress

When an employer has failed to pay a worker what they are owed under the law, the worker generally must file a wage claim with the Labor Commissioner, sue for damages, or file a representative civil action against the employer through California’s Private Attorneys General Act (PAGA). When a worker files a wage claim with the LCO, the LCO will investigate the claim. The LCO must notify both parties within 30 days of the complaint as to whether a hearing is required to adjudicate the claim, whether the LCO will prosecute the labor law violation, or whether no further action will be taken. If the LCO determines a hearing is needed, it must set the matter for a hearing within 90 days. (Lab. Code § 98.) The LCO must file and serve on each party its decision within 15 days after the hearing, after which the parties have 10 days from the date of service to seek review of the LCO’s decision in the superior court. (Lab. Code §§ 98.1, 98.2.) If no party appeals the LCO’s decision by this deadline, it is deemed final, and the LCO has 10 days to file a copy of the final order with the superior court. (Lab. Code § 98.2(d)-(e).) The superior court then enters a judgment pursuant to the final order that has the same force and effect as a judgment in a civil action, and the LCO or the employee can take action to enforce that judgment.

1. Current avenues for ensuring payment of wage claim judgments are insufficient

When there is a final judgment against an employer, the Labor Code currently provides for a variety of mechanisms to ensure the employer satisfies the judgment. After 20 days from when a judgment is entered in favor of the LCO or in favor of an employee after a hearing before the LCO, the LCO may collect the outstanding amount of the judgment with the consent of the aggrieved employee by placing a levy on the employer’s assets and property. (Lab. Code § 96.8.) Under Labor Code section 238, if a final judgment for unpaid wages remains unsatisfied after 30 days or more from the time to appeal the judgment and no appeal is pending on the judgment, the employer is prohibited from conducting any business in the state, unless it obtains a specified bond or has reached an accord with the holder of the judgment for payment. (Lab. Code § 238.) If an employer continues conducting business despite the unsatisfied judgment, the LCO may order a stop order, or create a lien on any of the employer’s real or personal property in California. (Lab. Code §§ 238.1-238.3.) Furthermore, any employer that continues to conduct business after 30 days from when the judgment became unsatisfied is subject to a civil penalty of $2,500, and an additional penalty of $100 for every day that the judgment remains unpaid when the employer has previously been assessed a civil penalty for an unsatisfied judgment. (Lab. Code § 238(f).) If an employer who previously failed to pay a judgment for a labor law violation again fails to pay a judgment within 10 years of the previous failure to pay a judgment, and may bring an action for a temporary restraining order against the employer prohibiting the employer from doing business in the state unless they deposit a bond to pay the wages of their employees under the law or satisfy any judgment for failing to do so. (Lab. Code § 243.)

1. SB 355 aims to ensure employees can recover when they win by creating a new civil penalty for failing to pay an unsatisfied judgment, and by requiring the employer to file specified documentation with the LCO

SB 355 aims to increase enforcement of LCO judgments and ensure that workers who are wronged by their employer can be paid. It requires that an employer against whom a final judgment has been entered as a result of an order, decision, or award by the LCO to file with the LCO within 60 days of the entry of the final judgment certain documentation that the judgment has been satisfied, that the employer obtained a bond as required, or that the employer has entered into an agreement to pay the judgment in installments. If an employer does not file this required documentation with the LCO within the 60-day timeline, SB 355 makes the employer subject to a civil penalty of $2,500.

Additionally, if an employer fails to provide the required documentation by the 60-day deadline, SB 355 also requires the LCO to provide the Employment Development Department (EDD) with a summary of the final judgment and the information of the employer. It first requires the LCO to provide a delinquent employer with a notice by first class mail within 30 days after the 60-day deadline expires, explaining that the LCO will submit the judgment to the EDD as a notice of potential tax fraud. If, within 90 days of that notice, the employer still fails to provide the LCO with the required documentation of their compliance with the final judgment and fails to pay the civil penalty for that failure, SB 355 requires the LCO to provide the EDD with the summary of the judgment and the employer’s information within 30 days.

According to the author, this process is meant to strengthen enforcement of final judgments of wage theft, and to ensure cross-agency collaboration so that bad actors are also held accountable for the tax fraud that often accompanies wage theft. This would act as a tool of deterrence to ensure final judgments are actually paid by employers. Providing the information of an employer who has a judgment for wage theft to the EDD is relevant because an employer underpays their share of state payroll taxes when they underpay their workers. This is a form of tax fraud, which the EDD can investigate and issue assessments and tax liens for committing. Thus, while an employer has liability to the LCO or an employee against whom it committed wage theft, an employer can have additional liability to the EDD for failing to pay payroll taxes on the wages stolen from their employee. Thus, SB 355 attempts to pressure employers to pay their wage theft judgments through the threat of additional liability and enforcement action from the EDD, and provides the EDD with the information of recalcitrant employers so that the EDD can engage in enforcement activities regarding tax fraud.

1. Arguments in support

According to the California Federation of Labor Unions, AFL-CIO, which is the sponsor of SB 355:

Wage theft is an employer’s failure to pay workers the wages and benefits they owe for hours worked. This practice has a disproportionate impact on disadvantaged and immigrant workers who are overrepresented in low wage industries with higher rates of wage theft, including agriculture, construction, garment, and hospitality. Unfortunately, the practice is pervasive in California and in 2023 alone, the LCO received 39,000 wage theft claims. Wage theft costs workers billions in lost wages annually, but it also costs taxpayers. When employers fail to pay the full amount of wages owed, they are also not paying payroll taxes to the state on those wages.

Despite the best efforts of the Labor Commissioner and other enforcement agencies, state-level enforcement of labor law violations is inadequate. There are numerous barriers to enforcement even if agencies were well-funded, but instead, these agencies are underfunded and understaffed – both Cal/OSHA and the Labor Commissioner’s Office have vacancy rates above 30%. Even when fully funded and staffed, there are millions of employers and workplaces in California and wage theft is pervasive. Enforcement agencies need more tools to make sure workers are paid for all the hours they work at the appropriate rate.

One of the most frustrating situations for workers is when the LCO issues an order, decision or award (ODA) for a worker, but the employer fails to pay. Employers may deliberately delay the process as much as possible or refuse to communicate with the LCO, making it impossible to collect stolen wages. In 2017 alone, workers filed $320 million in wage theft claims, and only $40 million were recovered, with less than half of workers recovering any wages at all.

Current enforcement mechanisms lack sufficient deterrents, enabling employers to treat wage theft as a calculated risk, knowing that they face very few tangible or immediate consequences for noncompliance when the status quo allows them to deny claims, delay payments, or refuse payments altogether.

SB 355 provides the LCO with new enforcement tools to address the failure to pay wage judgments. First, it requires employers who have an outstanding ODA to notify the LCO if they have already paid the judgment, have posted bond, or have entered into an agreement to pay, after 60 days of an ODA becoming final. This simple requirement will clear up many cases that are already closed and are creating backlogs at the LCO, saving the agency valuable resources.

Secondly, when an employer fails to pay an order, decision, or award for wage theft to a worker, it authorizes the LCO to provide written notice to the judgment debtor employer that the Labor Commissioner will submit the ODA to the Tax Support Division of the Employment Development Department (EDD), which collects payroll tax, as a notice of potential tax fraud. The notice to the EDD is an important flag that there may be tax issues with the employer, either from failure to pay wages or misclassification of workers. This bill gives the LCO a powerful deterrent for employers who fail to pay outstanding wage theft judgments in a timely fashion, ensuring that the state does not continue to lose out on expected revenue and workers no longer have to continue waiting for the pay they have earned.

SUPPORT

California Federation of Labor Unions, AFL-CIO (sponsor)

Sheet Metal Workers' Local Union No. 104 (SMART) (sponsor)

California Rural Legal Assistance Foundation

California School Employees Association

CFT- a Union of Educators & Classified Professionals, AFT, AFL-CIO

Sheet Metal Workers' Local Union No. 104 (SMART)

UFCW - Western States Council

OPPOSITION

None received

RELATED LEGISLATION

Pending Legislation:

SB 648 (Smallwood-Cuevas, 2025) authorizes the Labor Commissioner to investigate and issue a citation or initiate a civil action for a violation of state laws regarding tips, and specifies the procedures for issuing, contesting, or enforcing judgments for any such citation. SB 648 is currently pending before this Committee.

SB 261 (Wahab, 2025) requires the Labor Commissioner to post to its website a copy of orders, decisions, or awards filed by the Labor Commissioner and the information of employers with unsatisfied judgments, as specified, and establishes a civil penalty for a final judgment for nonpayment of wages that remains unpaid for 180 days. SB 261 is currently pending before the Senate Appropriations Committee.

AB 1234 (Ortega, 2025) revises the process for the Labor Commissioner to investigate and hear employee complaints, and would make other changes to the process by which a party may appeal an order, decision, or award made by the Labor Commissioner. AB 1234 is currently pending in the Assembly Labor and Employment Committee.

AB 485 (Ortega, 2025) requires a state agency, if an employer is required to obtain a license or permit from that state agency, to deny a new license or permit or renewal for that employer when the employer is in violation of the prohibition against conducting business in the state for having an unsatisfied final judgment for the nonpayment of wages. AB 485 is currently pending before the Assembly Appropriations Committee.

Prior Legislation:

AB 594 (Maienschein, Ch. 659, Stats. 2023) authorized the Attorney General, district attorneys, city attorneys, county counsel, or any other city prosecutors to enforce specified provisions of the Labor Code. AB 594 provided for its provisions to be repealed on January 1, 2029.

SB 588 (De León, Ch. 803, Stats. 2015) prohibited an employer from conducting business in the state when a final judgment against the employer for unpaid wages remains unsatisfied for 20 days after the deadline for appeal has expired and no appeal is pending, and provided the Labor Commissioner the authority to impose a lien on an employer’s personal and real property for the full amount of wages and other amounts due when the employer violates this provision.

AB 469 (Swanson, Ch. 655, Stats. 2011) made it a misdemeanor for an employer to willfully fail to pay a final court judgment, among other changes.

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.

AB 2509 (Steinberg, Ch. 876, Stats. 2000) revised the processes for the Labor Commissioner to conduct administrative hearings and issue orders, decisions, and awards for violations of labor law, and prohibited employers from receiving or deducting gratuities paid by patrons directly to a dancer subject to specified orders of the commission. AB 2509 also required employers to remit to their employees gratuities paid by credit card, without deduction for credit card fees, not later than the next regular payday following the date the credit card payment is authorized by the patron.

PRIOR VOTES:

Senate Committee on Labor, Public Employment and Retirement (Ayes 5, Noes 0)

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

1. David Cooper & Teresa Kroeger, “Employers steal billions from workers’ paychecks each year,” Economic Policy Institute (May 10, 2017), https://www.epi.org/publication/employers-steal-billions-from-workers-paychecks-each-year/. ↑

2. Jake Barnes et al., Wage Theft in California: Minimum wage violations, 2014-2023, Rutgers School of Mgmt. and Lab. Rel. (May 2024), available at https://www.smlr.rutgers.edu/news-events/smlr-news/minimum-wage-theft-rises-sharply-california. ↑

3. Id. ↑

4. Ross Eisenbrey & Brady Meixell, “Wage theft is a much bigger problem than other forms of theft – but workers remain mostly unprotected,” Economic Policy Institute (Sept. 18, 2014), https://www.epi.org/publication/wage-theft-bigger-problem-forms-theft-workers/. ↑

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

6. Legislative Analyst’s Office, “The 2020-2021 Budget: Improving the State’s Unpaid Wage Claim Process,” (Feb. 19, 2020), https://lao.ca.gov/Publications/Report/4165. ↑

7. California State Auditor, “2023-104 The California Labor Commissioner’s Office: Inadequate staffing and poor oversight have weakened protections for workers,” Report No. 2023-104 (May 29, 2024), https://www.auditor.ca.gov/reports/2023-104/. ↑

8. Sarah Hinkley et al., Race to the Bottom: How Low-Road Subcontracting Affects Working Conditions in California’s Property Services Industry, UC Berkeley Labor Center (Mar. 8, 2016), https://laborcenter.berkeley.edu/race-to-the-bottom/. ↑

9. Cooper and Kroeger, supra note 1. ↑

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Lola Smallwood-Cuevas, Chair

2025 - 2026 Regular

Bill No: SB 355 Hearing Date: April 9, 2025

SUBJECT: Judgment debtor employers: Employment Development Department

KEY ISSUES

This bill 1) requires employers with unsatisfied judgments for owed wages to provide, within specified timelines, documentation to the Labor Commissioner (LC) that the judgment is fully satisfied or the judgment debtor entered into an agreement for the judgment to be paid in installments, as prescribed; 2) subjects the judgment debtor employer to a civil penalty for violations; and 3) requires the LC to notify the Tax Support Division of the Employment Development Department of unsatisfied judgments as a notice of potential tax fraud.

ANALYSIS

Existing law:

1. Establishes within the Department of Industrial Relations (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)
2. 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 wage claims including claims for loss of wages, as specified. (Labor Code §96)
3. Establishes a citation process for the LC to enforce violations of the minimum wage that includes, among others, 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.
   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. 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.
   5. 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.)
4. Requires the LC, within 15 days after the hearing is concluded, to file in the office of the division a copy of the order, decision, or award (ODA). The ODA shall include a summary of the hearing and the reasons for the decision. Additionally, the ODA includes any sums found owing, damages proved, and any penalties awarded pursuant to the Labor Code, including interest on all due and unpaid wages, as specified. (Labor Code §98.1)
5. Upon filing of the ODA, requires the LC to:
   1. Serve a copy of the decision personally, by first-class mail, or in the manner specified in Section 415.20 of the Code of Civil Procedure on the parties.
   2. Advise the parties of their right to appeal the decision or award and further advise the parties that failure to do so within 10 days shall result in the decision or award becoming final and enforceable as a judgment by the superior court.

(Labor Code §98.1 and §98.2)

1. Provides that if a final judgment against an employer arising from the employer’s nonpayment of wages for work performed in this state remains unsatisfied after a period of 30 days after the time to appeal therefrom has expired and no appeal therefrom is pending, the employer shall not continue to conduct business in this state, as specified, unless the employer has obtained a bond from a surety company and has filed a copy of that bond with the Labor Commissioner. The bond shall be effective and maintained until satisfaction of all judgments for nonpayment of wages. The principal sum of the bond shall not be less than the following:
   1. Fifty thousand dollars ($50,000) if the unsatisfied portion of the judgment is no more than five thousand dollars ($5,000).
   2. One hundred thousand dollars ($100,000) if the unsatisfied portion of the judgment is more than five thousand dollars ($5,000) and no more than ten thousand dollars ($10,000).
   3. One hundred fifty thousand dollars ($150,000) if the unsatisfied portion of the judgment is more than ten thousand dollars ($10,000).

(Labor Code §238)

1. Specifies that if no appeal of the ODA is filed within the period specified, the ODA shall, in the absence of fraud, be deemed the final order. Existing law then requires the LC to file, within 10 days of the ODA becoming final, a certified copy of the final order with the clerk of the superior court of the appropriate county unless a settlement has been reached by the parties and approved by the LC. Judgment shall be entered immediately by the court clerk in conformity therewith. (Labor Code §98.2)
2. In order to ensure that judgments are satisfied, authorizes the LC to serve upon the judgment debtor, personally or by first-class mail at the last known address of the judgment debtor listed with the division, a form, as specified, to assist in identifying the nature and location of any assets of the judgment debtor. Requires the judgment debtor to complete the form and cause it to be delivered to the division within 35 days, unless the judgment has been satisfied. (Labor Code §98.2)
3. Provides that in case of willful failure by the judgment debtor to comply with a final judgment, the division or the judgment creditor may request the court to apply the sanctions provided in Section 708.170 of the Code of Civil Procedure including an order requiring a person to appear before the court. Failure to appear can result in a warrant to have the person brought before the court to answer for the failure to appear. (Labor Code §98.2)
4. Requires the LC to make every reasonable effort to ensure that judgments are satisfied, including taking all appropriate legal action. (Labor Code §98.2)
5. Authorizes, until January 1, 2029, a public prosecutor to prosecute an action, either civil or criminal, for a violation of certain provisions of the labor code or to enforce those provisions independently. (Lab. Code §181)
6. Establishes the Employment Development Department (EDD) within the Labor and Workforce Development Agency. EDD is responsible for, among other duties, the collection of payroll taxes from employers in the following four categories: Unemployment Insurance Tax; Employment Training Tax; State Disability Insurance Tax; and California Personal Income Tax. EDD’s Tax Branch works with employers to ensure that necessary payroll taxes and information are reported promptly and accurately to the department. (Unemployment Insurance Code §301 et seq.)

This bill:

1. Requires the judgment debtor employer, within 60 days of a final judgment being entered against an employer requiring payment to an employee or the state pursuant to existing law, to provide documentation to the Labor Commissioner that any of the following are true:
   1. The judgment is fully satisfied.
   2. The bond required by subdivision (a) of Section 238 has been posted.
   3. The judgment debtor has entered into an agreement for the judgment to be paid in installments pursuant to subdivision (b) of Section 238 and is in compliance with that agreement.
2. Subjects a judgment debtor employer who fails to comply with the above provisions liable for a civil penalty of two thousand five hundred dollars ($2,500).
3. Requires the LC, if a judgment debtor employer does not comply with the provisions specified in (1) above within the stipulated timeline, to, no later than 30 days from the passage of the 60 days, provide written notice to the judgment debtor employer that the LC will submit the unsatisfied judgment to the Tax Support Division of the EDD as a notice of potential tax fraud.
4. If the judgment debtor employer does not comply with the provisions specified in (1) above and pay the civil penalty prescribed by (2) within 90 days from the date of the written notice required by (3), then requires the Labor Commissioner to, within 30 days, provide to the EDD a notice that includes both of the following:
   1. A summary of the final judgment.
   2. The names and identifying information of the persons or entities liable for payment of the judgment, including social security numbers, taxpayer identification numbers, and addresses.

COMMENTS

1. Background

Data on Wage Theft:

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 percent of wages owed, totaling more than $47 million paid to workers.

A 2024 Rutgers School of Management and Labor Relations report assessed minimum wage violations across four metropolitan statistical areas of interest – Los Angeles/Long Beach/Anaheim, San Jose/Sunnyvale/Santa Clara, San Diego/Carlsbad/San Marcos, and San Francisco/Oakland/Fremont.^[3] Among the key findings of the report are the following:

• An average of $2.3 to $4.6 billion in earned wages were lost by workers each year from 2014 to 2023 due to minimum wage violations across these four metro areas.
• The majority of lost wages were in the Los Angeles area, where we estimate an average of $1.6 to $2.5 billion was lost a year during the study period.
• Those that were paid below the minimum wage lost roughly 20 percent of their total paycheck on average, or nearly $4,000 in earned wages a year if working full-time.
• The most impactful violations occurred in the San Francisco area, where workers lost an average of $4,300 to $4,900 annually to minimum wage violations.
• The number of workers paid below both the state and primary metro minimum wages has more than doubled since 2014, growing particularly dramatically over the most recent year of the study (2023).

Wage theft does not only affect workers, but also creates 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.

Existing Wage Theft Adjudication Process:

As noted under existing law, a worker may file a wage theft claim with the DLSE. The DLSE, also known as the LC’s office, is then tasked with resolving wage theft claims by investigating, facilitating a resolution with the worker and employee, and holding a hearing when necessary. In some cases, claims may go directly to civil litigation, skipping the settlement conference and hearing steps.

Once the LC issues an order, decision, or award (ODA), the employer has a limited time after service of the LC decision to file an appeal. If no appeal is filed within the specified period, the LC must file a certified copy of the decision with the appropriate Superior Court and obtain a judgment against the employer for the amount owed. When the LC requests that the court enter the judgment against the employer, the worker can choose the option of referring the judgment to the LC’s Enforcement Unit for collection or pursue collection on their own or through the use of an external partner, such as a private attorney or advocacy groups.

The DLSE Enforcement Unit can use a variety of means to collect judgment amounts, including levies against employers’ bank accounts and liens on properties. Additionally, DLSE calculates interest accrued on any outstanding judgment amounts for collection purposes.

Existing law prescribes specified number of days for each step in the wage theft adjudication process, with 135 days being the maximum number of days under which it is to be resolved. Below is the timeline under which the DLSE is required to respond to a wage theft claim:

• 30 days from claim submission to gather information and determine if a hearing is necessary OR takes no further action and notifies parties.
• Hold a hearing within 90 days of determination that a hearing is necessary.
• Within 15 days after the hearing is concluded, file an order, decision, or award.
• Within 10 days of service of an ODA, parties can appeal OR the LC files the ODA with the appropriate Superior Court and the court issues a judgment against the employer.

State Auditor Report on the Labor Commissioner’s Office:

In May 29, 2024, the California State Auditor released a report summarizing the findings of an audit of the Division of Labor Standards Enforcement. The State Auditor reviewed the backlog of wage claims submitted by workers from fiscal years 2017-18 through 2022-23, and determined that the LC is not providing timely adjudication of wage claims for workers primarily because of insufficient staffing to process those claims.^[4] The backlog grew from 22,000 cases at the end of fiscal year 2017–18 to 47,000 cases at the end of fiscal year 2022–23. As of November 1, 2023, more than 2,800 claims had been open for five years or more; these claims equated to more than $63.9 million in unpaid wages.

Among other things, the report found:

• The LC’s office often takes two years or longer to process wage claims, with a median of 854 days to issue a decision (more than six times longer than the law allows).
• Field offices have insufficient staffing to process wage claims with vacancy rates equal to or greater than 10 percent, and 13 field offices with vacancy rates greater than 30 percent. The Auditor estimates that the LC’s office needs hundreds of additional positions to resolve its backlog. Contributing to the high vacancy rate is an ineffective and lengthy hiring process and non-competitive salaries.
• The DLSE’s Enforcement Unit’s work results in only a small percentage of successful payment to workers. Between January 2018 and November 2023, about 28 percent of employers did not make LC‑ordered payments. The LC consequently obtained judgments against those employers. In roughly 24 percent of judgments during that time, or about 5,000 cases, the workers referred their judgments to the Enforcement Unit. The unit successfully collected the entire judgment amount in only 12 percent of those judgments, or in about 600 cases.

Employment Development Department Payroll Tax Collection:

California’s Employment Development Department administers the State’s payroll tax programs and is one of the largest tax collection agencies in the nation. EDD’s Tax Branch administers the following payroll tax programs and works with employers to ensure that payroll taxes are reported promptly and accurately:

• Unemployment Insurance (UI)
• Employment Training Tax (ETT)
• State Disability Insurance (SDI)
• Personal Income Tax (PIT) Withholding

According to EDD, in State Fiscal Year 2018-19, the Tax Branch collected more than $81.4 billion in payroll taxes, including $67.7 billion in PIT withholdings.^[5] EDD is also tasked with maintaining wage records for more than 18.5 million workers, including verifying the reporting of wages and ensuring accurate reporting of taxes. The adequacy of tax reporting is especially crucial given that these funds support the UI, SDI, and employment training programs of the State, as well as the State General Fund.

Failure by employers to pay their workers and their state tax responsibilities contributes to the underground economy. The underground economy is a term that refers to people and businesses that deal in cash or use other schemes to hide their activities and their true tax liability from government licensing, regulatory, and taxing agencies. The underground economy is also known as tax evasion, tax fraud, cash pay, tax gap, payments under-the-table, and off-the-books.

As noted by the EDD, the actual size of the underground economy is difficult to measure. In September of 2019, the IRS released a new set of tax gap estimates for tax year 2011-2013. The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time. After adjusting for audit and collection activities, the IRS estimates that in 2011-2013 the net national tax gap was approximately $381 billion.^[6]

As noted by EDD, when businesses operate in the underground economy, they illegally reduce the amount of money used for insurance, payroll taxes, licenses, employee benefits, safety equipment, and safety conditions. These types of employers then gain an unfair competitive advantage over businesses that comply with the various business laws. This causes unfair competition in the marketplace and forces law-abiding businesses to pay higher taxes and expenses.^[7]

California has taken aggressive efforts to target the underground economy, including with the creation of the Joint Enforcement Strike Force, with membership from various state departments including, among others, the Franchise Tax Board and DIR, with the mission of reducing unfair business competition and protecting the rights of workers. Among other things, the Strike Force is tasked with coordinating the joint enforcement of tax, labor, and licensing laws as well as finding and deterring payroll tax violations, including unreported or unpaid payroll tax deductions.

2. Need for this bill?

According to the author:

“Despite the best efforts of the Labor Commissioner and other enforcement agencies, state-level enforcement of labor law violations remains inadequate. There are numerous barriers to effective enforcement, even if agencies were well-funded, but in reality, these agencies are underfunded and understaffed – both Cal OSHA^[8] and the Labor Commissioner’s Office^[9] have vacancy rates above 30%.

One of the most frustrating situations for workers occurs when the LCO issues an order, decision or award (ODA) for a worker, but the employer fails to pay. Employers may deliberately delay the process or refuse to communicate with the LCO, making it nearly impossible to collect stolen wages. As a result, claims can take over 850 days to process – six times the statutory limit of 135 days.^[10] In 2017, workers filed $320 million in wage theft claims, but only $40 million were recovered, with less than half of workers receiving any wages at all.^[11] Additional statewide impacts of unpaid wage theft claims include California losing payroll and income tax revenue, as well as sales tax revenue that would have been generated from workers’ earnings. Overall, this weakens consumer demand, harms local businesses, and slows economic growth for the state.^[12]

Current enforcement mechanisms lack sufficient deterrents, allowing employers to treat wage theft as a calculated risk. They face very few tangible or immediate consequences for noncompliance, enabling them to deny claims, delay payments, or refuse payments altogether.

SB 355 supports California workers who have been victims of wage theft by providing the Labor Commissioner’s Office (LCO) with a new enforcement tool by authorizing the LCO to submit a notice of an unpaid wage theft claim to the Tax Support Division of the Employment Development Department (EDD) as potential tax fraud.”

3. Proponent Arguments:

According to the sponsors, the California Federation of Labor Unions and the Sheet Metal, Air, Rail and Transportation Workers Local 105:

“Current enforcement mechanisms lack sufficient deterrents, enabling employers to treat wage theft as a calculated risk, knowing that they face very few tangible or immediate consequences for noncompliance when the status quo allows them to deny claims, delay payments, or refuse payments altogether.

SB 355 provides the LCO with new enforcement tools to address the failure to pay wage judgments. First, it requires employers who have an outstanding ODA to notify the LCO if they have already paid the judgment, have posted bond, or have entered into an agreement to pay, after 60 days of an ODA becoming final. This simple requirement will clear up many cases that are already closed and are creating backlogs at the LCO, saving the agency valuable resources.

Secondly, when an employer fails to pay an order, decision, or award for wage theft to a worker, it authorizes the LCO to provide written notice to the judgment debtor employer that the Labor Commissioner will submit the ODA to the Tax Support Division of the Employment Development Department (EDD), which collects payroll tax, as a notice of potential tax fraud. The notice to the EDD is an important flag that there may be tax issues with the employer, either from failure to pay wages or misclassification of workers. This bill gives the LCO a powerful deterrent for employers who fail to pay outstanding wage theft judgments in a timely fashion, ensuring that the state does not continue to lose out on expected revenue and workers no longer have to continue waiting for the pay they have earned.”

4. Opponent Arguments:

None received.

5. Double Referral:

As originally introduced, this bill included provisions requiring the Department of Motor Vehicles (DMV) to suspend the driver license and car registration of employers with unsatisfied judgments requiring the double referral of the bill to this Committee and Senate Transportation Committee. Amendments taken on March 28, 2025 removed all provisions related to the DMV and added the provisions related to the referral of employers with potential tax fraud to EDD. If passed out of this Committee today, the bill will be sent to the Committee on Rules for re-referral.

6. Prior/Related Legislation:

SB 261 (Wahab, 2025) attempts to recover unpaid wages owed to workers by: 1) requiring the Labor Commissioner (LC) to post a copy of an order, decision, or award (ODA) on a claim for unpaid wages on the division’s internet website; 2) prescribing when a posting can be removed; 3) requiring notification by certified mail to employers prior to the posting of an ODA; 4) subjecting, for final judgments unsatisfied after a period of 180 days, the employer to a civil penalty not to exceed three times the outstanding judgment amount; and 5) authorizing the LC to adopt regulations and rules of practice and procedures to enforce these provisions. SB 261 was heard and passed by this Committee on March 26, 2025 and is pending hearing in Senate Judiciary Committee.

SB 310 (Wiener, 2025) would permit the penalty for failure to pay wages owed to employees to be recovered through an independent civil action, as specified. SB 310 is being heard by this Committee April 9, 2025.

AB 485 (Ortega, 2025) would require state agencies to deny a new license or permit, or the renewal of an existing license or permit, for employers that have outstanding wage theft judgments and have not obtained a surety bond or reached an accord with the affected employee to satisfy the judgment. AB 485 is pending in Assembly Appropriations Committee.

AB 1234 (Ortega, 2025) would, among other things, revise and recast the provisions relating to the process for the LC to investigate, hold a hearing, and make determinations relating to an employee’s complaint of wage theft. Among other things, the bill would impose an administrative fee payable in the amount of 30 percent of the ODA to be deposited into the Wage Recovery Fund, created by the bill, and appropriated to compensate the LC for the staffing required to investigate and recover wages and penalties owed to aggrieved employees. AB 1234 is pending in Assembly Judiciary Committee.

AB 594 (Maienschein, Chapter 659, Statutes of 2023), until January 1, 2029, clarified and expanded public prosecutors’ authority to enforce the violation of specified labor laws through civil or criminal actions without specific authorization from the DLSE.

SUPPORT

California Federation of Labor Unions, AFL-CIO (Co-Sponsor)

Sheet Metal, Air, Rail, and Transportation Workers Local 105 (Co-Sponsor)

OPPOSITION

None received

-- 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. Daniel J. Galvin, Jake Barnes, Janice Fine, and Jenn Round. Wage Theft in California: Minimum Wage Violations, 2014-2023. (Rutgers School of Management and Labor Relations, May 2024) ↑

4. Auditor of the State of California (May 2024). The California Labor Commissioner’s Office: Inadequate Staffing and Poor Oversight Have Weakened Protections for Workers. (Report 2023-104) https://www.auditor.ca.gov/wp-content/uploads/2024/05/2023-104-Report.pdf ↑

5. Employment Development Department, Payroll Taxes Fact Sheet https://edd.ca.gov/siteassets/files/pdf_pub_ctr/de8714e.pdf ↑

6. Employment Development Department, Underground Economy Operations. https://edd.ca.gov/en/payroll_taxes/underground_economy_operations ↑

7. Ibid ↑

8. 2023-104 The California Labor Commissioner’s office Audit ↑

9. Broken Laws, Unprotected Workers: Violations of Employment and Labor Laws in America’s Cities ↑

10. California State Auditor, Inadequate Staffing and Poor Oversight Have Weakened Protections for Workers (Report 2023-104), May 2024, p. 12. ↑

11. 2020-21 Budget: Improving the State’s Unpaid Wage Claim Process ↑

12. https://www.epi.org/publication/employers-steal-billions-from-workers-paychecks-each-year/ ↑