Senate Standing Committee on Labor, Public Employment and Retirement

Good morning, everyone. Welcome to this oversight hearing of the Joint Legislative Audit Committee, the Assembly labor and Employment Committee, and the Senate Labor Public Employment and Retirement Committee. At today's hearing, we'll discuss the results and recommendations from a recent state audit produced by the California State Auditor and requested by the Audit Committee.

The report is titled the California Labor Commissioner's office. Inadequate staffing and poor oversight have weakened protections for workers. I want to thank Assemblymember Ortega and Senator Smallwood-Cuevas, as well as the Members of the labor committees for joining us at today's hearing. I also want to thank Senator Glazer and Assemblymember Alvarez for requesting this audit. Thank you both.

As you'll notice, on the agenda, we will first hear from the state auditorium, who will present the results of the audit. The State Auditor will be followed by the Department of Industrial Relations. Thank you for making it here. And then the third panel will consist of the California Labor Federation.

The audit report identified numerous issues at the Commissioner's office. A backlog of 47,000 claims of wage theft. 33,000 claims have been part of the backlog for at least three years. Inadequate staffing. Some field offices have vacancy rates as high as 45%.

An inefficient wage claim process that takes more than two years on average to issue decisions on wage claims twice as long as it took just five years ago, and a collection rate of only 12% by the judgment enforcement unit.

I really hope that today we can dive in and get some level of comfort that fixes are in the works and that Californians suffering from wage thefts have greater hope at justice. Vice Chair Laird, do you have any opening comments that you'd like to make?

Yes. Thank you, Mister chair. I appreciate the opportunity and thank everybody for the hearing. I think between the two labor chairs and JLAC chair and me as Vice Chair, I'm the only one of the four that was in the debate in JLAC about whether or not to authorize this audit. Obviously, the two authors are here.

And when I came into that hearing, I was ambivalent. I actually publicly said I wasn't sure that I was going to vote for the audit. And yet that hearing was so persuasive that. And I was not alone.

There were two or three other people with me, and we all moved to authorize this audit because we felt like wage claims are real people with real justice issues. I thought if it's just a staffing pattern or something, maybe that's not worth an audit.

But I think this audit has really shone the light on what the issues are and that they're endemic and something that needs to be addressed for the justice for people with wage claims. But I think the heart of the hearing today will be what is really going to be done to address this.

And for example, if it's a commitment to more staffing, it's what actually will come from that. Do we know that actually will result in lowering the number of days and lowering the backlog? And how do we know it's not at risk in the budget?

And how do we know the positions are not going to be swept in the system?

And so I think not only was the audit of tremendous value, and I can see in particular Senator Glazer smiling off to the side because I think he watched my progression in that hearing from not wanting to vote for his audit to being a believer and what commitment is specific, then we can get to address this out of this hearing.

I look forward to it. And thank you for the opportunity to make some comments.

Thank you, Vice Chair Laird, Assemblymember Ortega, do you have any opening comments that you'd like to make?

Yes, thank you, chair. Thank you for being here this morning. I'm glad to finally come to this hearing and seeing my colleagues here as I've sat here several times for their retail theft hearings and, you know, often wondered what we were doing with wage theft.

So very glad to see that this is finally getting some attention, that we're here to talk about solving the problem, solving the issues.

One of my biggest concerns is that even if we fill all the current vacant positions, the scale of this problem has gotten so vast that we really need to consider more structural change and maybe start thinking about exploring alternatives, you know, from incentivizing employee compliance to empowering employee enforcement, you know, and I'm prepared.

I've talked to the, to the Commissioner and others about being a partner in this. I don't want this to just be a hearing. I want this to have action items. I know that you've already started some of those action items, but I want to continue to keep a light on this issue.

And, you know, the $6.7 million that are still out there owed to workers deserve this. So happy to be here, and thank you for allowing my participation.

Thank you, Assemblymember Ortega, Senator Smallwood-Cuevas, do you have any opening remarks?

Thank you, Mister chair and Vice Chair. And I'm honored to be here with my fellow leader in the Assembly of, of the Labor Committee.

And glad to be here with all of you coming from La County, which is the wage theft capital of California coming from working with very vulnerable communities of unemployed and underemployed and individuals trapped in unregulated work? I want to say how important this conversation is.

I think sometimes we get too caught up in the statistics and we don't understand the impact of what this means. But I think here in this building, we know, we talk about homelessness. We talk about the safety nets, folks who need medical, folks who need housing, food subsidy. It's not because they're not working.

It's because they're working in jobs that are not paying them. They're working in industries where employers are stealing from them. And I think this State of California has made this a priority. And what the audit in this conversation, I hope reveals is what is the solution?

And I think a big part of the solution is, of course, arming our labor Commissioner with the tools needed to address this massive issue. But we also have to be about creating good jobs. There are too many workers, too many schemes, and not enough capacity.

I don't think we'll ever have enough capacity to police what needs to be policed in the State of California. I was telling my good friend Senator Glazier that this is almost like mission impossible. So we have to think about what are the creative ways that we come at this, what are the different disciplines.

We have to come at this. And number one has to be, let's double down on creating quality jobs in California that pay people a living wage, that are regulated, that stipulate conditions, that raises the floor for all workers, and then we can figure out what we do with the outliers.

So I'm hoping that this is reinforcing our values in the State of California, that that is our utmost priority and that we will hold employers accountable and give our enforcement agencies the tools that they need. World's fifth largest economy.

We need the fifth largest enforcement entity in the world to deal with this economy where over 60% of new jobs created in my county were Low wage jobs last year. So this isn't going to go away because unfortunately, we have conditions that are perpetuating these cycles of poverty.

So we need to invest in robust and vigorous and creative tools to address the issue and not scapegoat and place blame. So I'm here for solutions.

I'm here for us to recognize the magnitude of the challenge, that we can step up and meet it, because we are what the moment requires and we have the power to do so, those on this dice and those who are sitting before us. So thank you very much for this opportunity.

Thank you. Senator Smallwood-Cuevas, Senator Glazer, would you like to make some opening remarks?

Thank you. Is this working? Yes. Thank you. Chair Hart, Vice Chair Laird, for allowing me to be here and participate. Chair Smallwood-Cuevas and chair Otega, thank you for your leadership in this space. We need it more than ever.

You know how hurtful this problem is, and I know that through your knowledge and experience, and both of you have that to really bring that energy and passion to real solutions. And it's great to hear your opening comments today. It's important for me to call out my partner in this effort, Assemblymember Alvarez.

When we held the hearing a year plus ago, it wasn't even though we thought we all knew that we had a problem. It wasn't so easy to get this audit to go forward. There was obviously opposition from the labor Commissioner. That wasn't a surprise.

But it was bewildering to see opposition from the labor community, which I still to this day, don't really fully understand. But hopefully we've made progress. Now, a new foundation of facts have been established. Facts on wait time, facts on backlog.

And really, the most stunning fact in that report, and I'll call it out, the chair didn't mention it at the beginning, was that in 76% of the cases, the labor Commissioner's office did not collect a single cent to return to those employees who did the work and weren't paid anything.

I'll just say this in closing, that by failing to resolve these cases, the labor Commissioner and the state have become accessories to these employer crimes. We have been, because we're not doing anything about it. So we're part of the problem, and we have to overcome that and rise above it.

I know that's the purpose of the hearing today. I know what you're saying is that that audit is not going to be put on the shelf gathering dust. And that makes me happy that we're all coming together to do something constructive about it. And I thank you for that.

Thank you, Senator Glazer.

Thank you, chair Hart and Vice Chair Laird and respective chairs of each house, for your opening comments.

And I think the first thing I wanted to reflect on is, having previously had really tremendous honor of chairing the JLAC Committee, is that I think we cannot forget on the value of what this Committee means to making sure that California works as best as possible for everyone.

I think the biggest takeaway is that the findings of this, which I'll express some comments about as well, but the findings of this demonstrate that even when there is opposition, which Senator Glazer said is not unsurprising by the Administration agencies, departments to undergo critical analysis as an audit does every single time, it demonstrates that it makes us better when we do an audit.

And I'm really proud that chair Hart and Vice Chair Laird have led them that same, that same way throughout this year's request for audits, because it's one of the few tools that we have as a legislative body to fully understand, vet, get literally under the hood of what's happening and what's working and also, just as importantly, what is not working.

And so I think it's important to underscore the value of the Joint Legislative Audit Committee of continuing to request that work that Members of our houses have through the process and of continuing to make sure that we ask those tough questions, even when there's opposition, that we might not comprehend why that opposition exists.

And certainly with this audit, which is shocking in some ways, although there were reports about what was happening, is, I think, an understatement. The questions that need to continue to be asked beyond this audit today are where are we? And it hasn't gotten, has it become any better?

Because if you recall, those of you who were at the hearing last year, we were promised, we were told that with more positions this problem was going to go away. I think the question we have to ask today is, is that the case? What do the numbers look like for this year?

Are we on pace to less than almost 900 days, which is the median of responding and adjudicating these wage theft claims? That's not the case. There are continues to be serious problems.

And adding personnel is not the only answer, especially if you look at in the appendix on page 57 of the full report where the Auditor outlines the statewide numbers of field positions that are authorized and vacant throughout the analysis of this audit. Every single year there were more positions available.

Sure, vacancies also increased, but there were more positions available and filled. And yet the numbers language, there is something really wrong happening. And I think today we have to continue to dig deep and get more direct answers as to how this is going to be a very different new day.

And if we don't do that, we will have wasted the time of the Auditor. We have wasted the time of the Commissioner. We have wasted all of our time if we don't start to see this turn around very quickly. And I couldn't agree more also with what the chairs of our labor Committee said.

We need to make sure that on the front of good jobs, that that becomes priority. That is a proactive solution. That should be.

But we know that there will always be sectors of our economy where workers like my father, who was a farm worker, janitor, my mother, who worked at a fast food restaurant, that will continue to be an industry. Which means that the threat of wage theft will continue to exist.

And if we aren't responding and having resolution and giving justice to those people, we will be failing. Continue to fail. That's not an option. So today I hope to be able to get not just responses and back and forth on the audit, but this, now is the moment going forward to make sure that this is not continued.

Thank you, Mister chair.

Thank you, Senator Lumber Alvarez. Is there anyone else on the dais that would like to make any opening comments? Okay. But then before proceeding further, I have a few housekeeping items that I want to ensure that, so that we can hear from everyone, I ask that the panels keep their presentations to the time allocated.

Following each panel's presentation, Members will have time to ask questions. We'll Reserve time for public comment after the last panel. And Members, are there any questions now before we begin with the first presentation? Okay. And State Auditor. State Auditor parks, the time is now yours.

Good morning, everyone. My name is Grant Parks, the State Auditor. Thank you. Chairs Hart Ortega and Smallwood-Cuevas. The Committee has asked me here today to speak briefly on an audit we issued on the labor Commissioner's office last month. As has been mentioned by way of background, Senator Glazer and assemblymember Alvarez requested the audit.

The report goes into a variety of different details, but for the purpose of brevity, I'll speak to three main issues during my presentation. And of course, we'll be able to speak to any other questions you may have. But the three points I plan to cover today focus on.

First, there was clearly a question in the audit request about how long does it take workers to even get a hearing to have their wage claims adjudicated by the labor Commissioner's office. Second, I'll be speaking about whether the Commissioner's office appears to have sufficient staff to address its backlog of wage claims.

And finally, we'll go into a brief discussion on the Commissioner staff after they find through a hearing that amounts are owed to workers. How long does it take for the state to actually help those workers get paid?

With me today, I have Chris Patel, who was the audit principal in charge of the audit, who managed it from a day to day basis. So he's here to help me answer any questions the Committee may have. So let me just get into the first issue.

I want to talk a little bit about wage claim workload and backlog, kind of the scope of the problem that we identified during the audit. State law generally prescribes certain timeframes in which the labor Commissioner's office must take certain steps.

So, for example, within 30 days of receiving a worker's claim, you have to determine if a hearing is necessary. Within 90 days of deciding that a hearing is necessary, you have to hold the hearing, and within 15 days of holding the hearing, you have to render a decision on the worker's claim.

So therefore, under state law, Commissioner staff must hold a hearing to adjudicate a worker's claim with about 120 days following receipt of the claim, and Commissioner staff must issue their decision 15 days later or 135 days after a worker submits a claim.

During the audit, we reviewed data from the Commissioner's case management system over a six year period and found that workers have not received timely decisions from the labor Commissioner's office.

For example, in 2017 to 18, the average time to issue a decision on a wage claim case following the submittal of the claim by the worker was 420 days. By 2223.

The last year we reviewed, that time had increased to over eight to an average of 890 days, which is about 6.5 times the 135 day period prescribed in law. As wage claim processing times increased, so did the labor commissioners open wage claim cases.

In 1718, the labor Commissioner had 22,000 open claims at the end of the year, but by 2223 that number had increased to about 47,000 open wage claims.

Nearly 33,000 of those had been part of the labor Commissioner's open cases for at least three years, and 2800 had been open for five years and represented $63.9 million in claimed unpaid wages. During the audit period, we reviewed again from 1718 to 2223.

We found that the wage claim backlog is pervasive across all 17 field offices where the labor Commissioner staff adjudicate worker claims. Each office has seen an increase in its backlog, wage claims that are at least 1000 claims increasing within each office, and we define those backlog claims as any of those cases where it's over 120 days.

We noted particularly large increases in backlog claims at San Bernardino, where the backlog increased by 515%, going from 869 cases to over 5000. Oakland increased by 202% and Los Angeles increased by 202%. Our audit also sought to understand at what stage of the wage claim process were delays most likely to occur.

For example, evaluating whether or not delays were occurring during the initial 30 day intake stage. Was it happening during the following 90 day period to hold a hearing? Or was it happening during the 15 day period when we expected a decision to be made on a workers claim?

But the truth is we found significant delays in all aspects of the wage claim process in fiscal year 2223. For example, we found statewide, across all 17 field offices, it took an average of 386 days to determine if a hearing was even necessary.

Statewide, it took an average of 636 days to hold a hearing after deciding that a hearing was necessary. And statewide, it took an average of 111 days to issue a decision after the end of a hearing. I'll note, for example, that San Diego and those are just averages, San Diego took 285 days to issue a decision.

In one particularly egregious example we noted during the audit, we found a worker who had filed a claim in 2014 and due to various scheduling issues at the labor Commissioner's office, they didn't attempt to schedule a hearing until 2019.

But because the labor Commissioner's staff didn't provide proper notice to the parties about the hearing, the hearing had to be rescheduled, and it wasn't rescheduled until four years later in August 2023. However, the assigned hearing officer wasn't available in August 2023.

So the office attempted another settlement conference where the worker was willing to accept less than half of the claimed amount.

But as of March 2024, this worker has yet to receive a hearing date roughly 10 years after filing a claim and has $71,000 in claims for unpaid overtime, mileage, reimbursement, and wages that were allegedly paid at less than minimum wage. The worker had served as a caregiver for clients who have now since deceased.

Ultimately, I think the audit shows that lengthy delays and backlogged wage claims mean that California's workers can wait years to receive owed wages, if at all. Next, I'll move to my second topic, which gets at some of the causes that we found during the audit.

For why we see these delays in these backlogs, I'll start with a discussion of staffing vacancies. As I believe Assemblymember Alvarez pointed out, one of the primary reasons for lengthy processing time and increasing backlog had to do with the lack of adequate staffing at the labor Commissioner's office.

Based on current processes, as of June 2023, the labor Commissioner's office had a vacancy rate of 33% across its entire wage adjudication unit. Some field offices had vacancy rates that were 40% or higher.

We also found that the vacancy rate for the deputy labor Commissioner position was 38%, and it's an important position because it's responsible for investigating worker claims and scheduling and conducting settlement conferences and determining whether a hearing is even necessary.

During the audit, we spoke with several of these offices and these labor commissioners who described that these vacancies resulted in them having more claims for them to manage than they can reasonably handle.

For example, one deputy informed us during the audit that they had more than 700 claims assigned to them at different stages of the adjudication process, and another indicated that they were managing more than 300 different claims.

When we spoke to a field supervisor in the Sacramento office, for example, about why they hadn't signed one of the claims we were reviewing to a deputy for over a year after receiving it. The supervisor similarly confirmed that all of his deputies were already managing substantial caseloads and therefore the case couldn't be assigned to a worker.

The second observation we have in the area of staffing is that we believe Low salaries may contribute to staff retention and vacancy issues in the labor Commissioner's office. The labor Commissioner's adjudication unit has a retention rate where since 201819% of new employees leave within about a year.

Dir began conducting exit conferences or exit interviews with former employees in August 2022, and about 85% of those individuals indicated they left to pursue other employment for better pay and for better benefits.

We also compared four job classifications in the labor's office to comparable positions in state government and also in county governments, local governments, and, for example, we found that hearing officers who often make rulings on wage cases often hold law degrees and make 4000 less per month than an administrative law judge.

Other positions such as deputy commissioners and industrial relation representatives. Although their salaries were generally consistent with other state classifications, we found instances where those salaries fell well below those of similar county jobs at the local level.

Dir told us during the audit that they're conducting a compensation analysis to understand better whether or not their salaries are appropriately set for their employees, but they acknowledge that this may take several years to implement because they're currently doing a worker classification study to understand the job specs of their employees, and I believe they plan to handle the salary question subsequent to that.

The third observation in the staffing arena has to do with the labor Commissioner's hiring process. We found it to be highly inefficient. The current hiring process involves the labor Commissioner coordinating with the DIR's HR Department, which expects the hiring process to generally take three months to complete.

However, in our review, we found that more than 300 recruitments that LCO conducted since April 2021 had had to cancel 135 of those 300 recruitments, or about 45% generally because the hiring process took too long, longer than six months to complete, resulting in the hiring eligibility list of those candidates who could be contacted for job offers had expired.

In one example, for a deputy Commissioner recruitment that we reviewed that was canceled, it took 97 days to start conducting interviews after posting the job bulletin online, and it took another 64 days to conduct interviews of the candidates.

One reason for these delays, we found, is that the LCO has a practice of holding interviews for multiple job positions at the same time across multiple offices all at once, which requires more time for the interview panel to interview everyone who applied and then determine who was the top scoring candidate at each different field office.

Compounding the problem of the lengthy recruitment cycle is the fact that candidates who are interviewed and selected by the Labor Commissioner for job offers do not always meet the minimum qualifications of the job and are subsequently rejected by Dir at the end of the recruiting cycle, leaving little time for the labor Commissioner to select another candidate for the position.

Our last observation in the staffing arena has to deal with our belief that the labor Commissioner may need significantly more staff in terms of filled positions to deal with the workload that it has during the audit.

We asked the labor Commissioner's office for estimates on how many hours it takes staff to complete work on a given wage claim at different stages of the wage claim adjudication process, such as, for example, how much time a given position should take during a hearing versus after a hearing.

And we took those per case estimates and we multiplied those hours by the number of claims that the Commissioner's office had at the various stages of the wage adjudication process.

That estimated result resulted in an estimate of roughly 1.3 million staff hours that would be required to handle that workload, which would create which equates to roughly 900 total staff. Of course, that number assumes that we're handling the entire backlog and all current workload all at once.

If the labor Commissioner was to hire less than that, it may take more time to make more of a meaningful dent into the backlog that currently exists.

But regardless, our high level estimate is intended to primarily illustrate the potential magnitude of the difference between the staffing that the labor Commissioner has asked for and has versus how much may be actually needed to start making meaningful progress towards reducing the backlog that they currently have.

The last issue, the third issue that I'll talk about in my presentation, focuses on what happens to workers after they've gone through the lengthy process of getting a judgment and now it's time to enforce collection on the claim. At this point, a worker has gone through the adjudication process.

The employer may decide that they don't want to pay anymore. So what happens next is the labor Commissioner staff will file a certified copy of their decision with the appropriate Superior Court and obtain a judgment against the employer for the amount owed.

At this point, the worker can either request the labor Commissioner's assistance to collect on the judgment or seek collection on their own. Between January 2018 and November 2023, nearly 21,000 workers had judgments of just which, of which just 24% or 5000 workers sought the help of the labor Commissioner's office in collecting the amounts owed.

And during this time, during the audit, we found the collection activity was as followed as follows. Roughly 601 cases were fully collected for $5.3 million in payments to workers. 548 cases were just partially collected, 3.8 million paid to workers, 6.7 million still owed.

But there was also a significantly large over 3700 cases, or about 76%, where we saw no collection activity at all, or about 56 million still owed to workers. And a significant portion of those claims had yet to be assigned to individuals in the labor Commissioner's enforcement unit to begin collection activities.

So overall, during this time period, the LCO's enforcement unit had recovered between 12 to 13% of the nearly 72 million in unpaid claims where there is both a legal judgment against the employer and where the worker has asked for the labor Commissioner's assistance in collecting on the amounts due.

In our review of the enforcement unit, we tried to determine what some of the reasons might be for the Low collection numbers, and we made the following observations.

While the enforcement unit does not frequently use all the methods available to them, we found that their inability to use all the tools at their disposal can affect the ultimate collection amount.

The primary cause for the inconsistency in terms of what collection methods are used is primarily because, in our view, the enforcement unit lacks standard procedures for determining which enforcement methods are most appropriate under what circumstances, and we also noted that the enforcement unit lacks even standards for how many cases should be assigned to a deputy at a given time.

Thus, when we were speaking with enforcement staff, we found that most often it's the case that enforcement staff use their own discretion when determining the appropriate collection methods to enforce on a judgment and also when to stop pursuing payments on a case.

We found that it can take the enforcement unit a very long time to take action on cases. After workers seek the labor Commissioner's assistance, we reviewed a selection of 50 cases referred to the enforcement unit, and it took, on average, more than 1000 days before we saw collection activity begin to take place.

For example, in one case from 2019, we noted that the labor Commissioner's office placed a lien on an employer's assets before the judgment was referred to the enforcement unit for collection. But the enforcement unit didn't take any additional steps until October 2023, more than 1000 days after referral, when it sent a demand letter to the employer.

But the enforcement unit has not taken any further action through November 2023, which was the period we stopped during our audit.

The enforcement unit pointed to multiple difficulties they have in collecting payments from employers, including the lack of assets in the name of the defendant, and also noting that judgments are frequently against companies rather than individuals, making it difficult to collect payments from individual participants of wage theft.

To their credit, we noted that the labor commissioners legal staff are currently providing training to their staff to address some of these difficulties, particularly in the area of making sure that they're identifying individuals upfront in the wage adjudication claim process so that when it does get to judgment, they can identify those individuals and start pursuing collection.

But they also believe that there's potential use of other tools that are available to the labor's commissioners, such as a mechanics lien, which would allow the labor Commissioner to impose liens before a judgment is actually entered so that some of those assets can be reserved for the worker.

Overall, I say that the labor Commissioner and Dir was helpful and cooperative during the audit. During our review, they indicated that they accepted all of our recommendations and we will be getting updates from them at six months, a year, and also 60 days after our audit went out.

We have a variety of recommendations to the labor Commissioner's office, but I'll just speak to a few of them.

The first one that we think that the labor Commissioner really needs to address is quickly completing and acting on its employee compensation survey and analysis to make sure that its compensation levels are appropriate, to make sure that it can both attract and retain the workers that it needs to handle its workload.

And we also believe it needs to take steps to streamline the interaction between Dir and the labor Commissioner's office in the hiring process. The fact that it takes six months to hire somebody and you get to the very end and there's no time left to go to the second candidate just strikes us as an incredibly inefficient process.

And finally, we think there needs to be an honest conversation about what are the staffing requirements necessary to fully address its backlogged wage claims and how quickly that number can start to reduce. In the audit report, we came up with a recommendation or an estimate rather of roughly 800 staff that would be required.

And so that assumes you put everybody all on it all at once. That may not be feasible. If you do less than that. You may be able to reduce the backlog over a longer duration of time.

But there needs to be a meeting of the minds about how many field positions do we need and also how many caseloads are we going to have per worker and what's the expectation in terms of when are we going to start seeing movement on those numbers?

During the audit, we didn't see any sort of workload analysis to that effect. That would give us an understanding of what the labor Commissioner thought, what the total amount of staffing would be required to address and bring down its backlog numbers.

With that, Chris Patellar, audit principal or myself would be happy to answer any questions you may have.

Thank you, Auditor Parks, for a very thorough presentation about the challenges that we're looking at. And I just have a question to kind of set the tone toward what are we going to do to fix this.

I understand that you, as the state auditory, have a process to follow up and encourage agencies to comply with the audit recommendations and suggestions for fixing the problems that you've identified. Could you please describe the mechanism, processes and monitoring efforts to ensure that the issues highlighted in the report are adequately addressed?

So, following publication of an audit report, we follow up with the agency at 60 days, six months in one year, where they're expected to provide more detailed responses and implementation plans to the recommendations that we offer in the audit report. And that status is posted on our website for the public to see.

So as the audit has been published and as we move forward in time, interested parties are able to go onto our website by recommendation and see what is it that the State Auditor's office recommended. What did the Department say they were going to do about it?

And also on that website that we have on our webpage, it'll give an expected implementation date.

And so we find that that information could be helpful to lawmakers as they have discussions with the agency, whether it's in budget hearings or in other venues where that information is readily available, and you can monitor the progress or lack of progress that is being made. I would stress, though, that these follow up conversations, they're not audits.

We don't have the time to re audit every audit that we've previously issued, but what these exercises are intended to do is provide the public with the most up to date understanding of where the auditee thinks they are in the implementation of our recommendations.

Thank you. And I see that you have one recommendation for the labor Commissioner to provide annual status reports to the Legislature. What do you think this requirement would result in that your standard follow up wouldn't be able to accomplish?

We thought it was a helpful recommendation just to ensure that there's heightened visibility of this issue, given how important it is for workers to obtain their wage claims and get them paid in a timely manner.

So we just wanted to make sure that the Legislature was as well positioned as possible to understand what it is the labor Commissioner is doing in terms of both, how is it addressing its backlog of claims and what progress it is making in filling its vacant positions.

I think those are the two key areas that we thought there might be value for the Legislature to get that information on a recurring basis.

Well, this is clearly a very important issue, not only to the Californians whose wages have been stolen, but to us, their representatives as well. And holding this hearing today confirms this. If additional resources are needed, we're going to have to find a way to allocate them.

And if annual reports to the Legislature will help, I'm sure that someone here on the dais will pick up that Bill idea and bring that forward at the earliest possible date. I'll open up the State Auditor for additional questions for Members of the Committee. Senator Cortese.

Just a question on. The. Recommendations that you're making on hiring. We all heard loud and clear what you described as an incredibly inefficient situation up to the moment. How much is Hr.

Requirements, you know, integrated into the problem, if at all. I don't recall whether or not. We have separate HR, you know, functions like we do with, with other agencies, or whether that's now, there's something in the back of my mind, maybe dating back to my time in informational hearings or possibly back when I was chairing the Labor Committee that wants to tell me that HR was integrated in, in effect, to the department.

But I'm trying to figure out, you know, how much is HR or HR hiring requirements that tend to slow things down. And I ask that only because I've seen so much of that, not just in state hiring processes in general, but also in my experience as a local government official, where oftentimes we'd be trying to hire folks in a hot hiring, tough hiring environment, competitive environment for our legal department, for example, and not be able to get through the HR hoops, the actual human resources piece of it, and get those recommendations and that process completed, you know, within similar timelines that you're describing in five or six months. And people would be gone, obviously, taking jobs elsewhere. Just trying to get a little more articulation. I'm sure it's all in the report, but if you could maybe just give me the 1 minute version right now, that would be helpful.

One of the graphics that we have in the report showed an example Deputy Commissioner hiring process, where we noted significant delays just in the back and forth between Labor Commissioner staff and DIR human resources staff, where they were just trying to get the job announcement posted versus. Okay, now, we have submitted the interview questions to DIR HR, and you got to get approval from HR and what the interview questions are. And so all those different steps of the process add time.

But I think one of the major reasons that we found for the lengthy process of taking six months in this particular case is, and Kris, you may be able to speak more articulately than I can, is that there's been this practice to have these very large recruitment efforts where you're hiring for a single type of position across multiple offices.

In that kind of setup, you generally want to have the same interview panel asking the same questions going through a number of different candidates who may have applied multiple times to different offices. So that's an incredibly long process to get through.

And when you get to the end of it and they've scored and they've ranked who's the highest scoring candidate at what office, the LCO makes a recommendation to DIR saying, here's who I want to hire. And we found in some instances where DIR said, well, that's nice, but they're not qualified. They don't meet the minimum qualification. So that seemed a little bit backwards to us. So, Chris, do you want to talk a little bit more about what we found in the...

Can I just interject a question? Is that happening both ways? Because I've seen, again, in my own experience as a public official, I've seen tension where HR will come in and say the candidate that you prefer or that you think is qualified isn't after, you know, much excitement about getting somebody hired. I'm just wondering if... I heard what you just said where the DiR is saying, hey, we don't think the person is qualified. I'm just wondering if it happens the other way around as well, frequently.

Kris, you want to talk to that?

Yeah, sure. Good morning. For the record, my name is Kris Patel, Principal Auditor with the State Auditor's Office. Yeah, what we saw was that the process is, according to DIR's process, it's supposed to take roughly 12 weeks from beginning to the end. But in reality, what we're seeing is you have the HR department within the department, and then you have the LCO staff who actually conduct the interviews and select the candidates. So there are minimum qualifications that every candidate must meet.

The LCO staff who conduct the interviews actually sometimes try to determine whether they meet the minimum qualifications, but they're not really looking for that in the same way that the HR staff would be looking at. And so often what we found is that they would go through the interview process, they would identify somebody, and then they would forward all that information to the DIR's HR office, who would then conduct all the minimum qualification reviews, only to find that, well, this person doesn't quite meet the minimum requirements.

And by then, so much time has passed that they just don't have additional time to go to the next candidate and try to figure out if they meet the minimum qualifications. So it's often the LCO staff who are conducting the interviews are not truly doing the minimum qualifications review. That's not their function. It goes to the HR office later who then determines that, no, they don't meet the minimum qualifications.

Thank you. Let me just make a comment and ask a question and I'll be done, Mr. Chair. But my first year here, for, my first full year here, 2021, I was a member of Senate Budget Subcommittee 5. And I came in kind of hot, as they say, wanting to see if we could solve this on the budgetary side.

And what I felt like I learned from that, and also from this audit, is that's not necessarily the issue, that there were plenty of vacant open positions that, funded vacant open positions that remain unfilled at that time. I see you're nodding your head. So I just wanted to make sure what I thought I learned in Senate Subcommittee 5 still stands or is affirmed by this audit.

Yes. There are plenty of vacant positions right now that have to be filled before the... And that is what we recommend is that fill those positions and then request additional positions.

And lastly, do you feel that your recommendations at this point, I mean, recommendations that you've made to date in this audit report, will solve those problems? Meaning filling vacant funded positions and then making the actual hiring process and whatever the tension is between HR and the department resolved? I mean, how confident are you that this set of recommendations will do that? And it's not a judgment. I'm just wondering if you feel this is step one of what needs to be done, or is this...

I think this is step one of what needs to be done. When we have some graphics in the report where we talk about what's the inflow of cases, regardless of backlog, what's the outflow of cases. And we looked at that over a six year period. I think in five of those six years, the inflow of cases, just alone, was bigger than the amount that was being closed. So the backlog, even though you put it to the side, it's just adding to the backlog year after year.

So that already tells me that the number of positions that they have isn't sufficient to just even tread water, so to speak. And the backlog at this point is roughly double, I believe, what they close in a given year. And so that's why we went through the whole estimation process of just take their assumptions about how long it takes to process a case at a given stage of the wage claim process. What does that mean in terms of man hours?

Yeah, you might be able to spread it over multiple years, but what's the magnitude of the bodies that we need? And it's well more than the authorized positions that the agency currently has. And so I think that the answer to your question is that Labor Commissioner clearly needs to start filling the vacant positions that it has. I'm less confident that, if it does so, that that alone is going to be able to address the backlog that currently exists.

Thank you. And I would agree with that based on what I've seen. I mean, obviously, this has been going on far too long. Obviously, aside from being judgmental about fault or where it's been coming from, you know, despite my questions about tension there, the most important thing on obviously on behalf of California's workforce is that we resolved this yesterday.

But I will say that, in addition to what we've heard today, I believe, especially when you get into immigrant communities and some of them being undocumented communities out there, based on hearings that I've conducted myself with colleagues, that there's a retaliation element out there that's in effect cutting down the number of claims that would be followed up on.

So to me, the backlog would actually be even greater. And I think this is in some sense agreeing with what you just said, Mr. Auditor. But the backlog would be even greater if there were enough personnel to go out and either revive or keep alive know claims that are in effect being shut down by shady employers who, you know, are threatening people with any number of things, including deportation, to make those go away. Those are things that we should be right on top of. But if we are right on top of them, I guess I'm agreeing with you that that's going to increase the volume of claims even more. But thank you very much for your work. Thank you, Mr. Chair.

Thank you, Senator Cortese. Are there any other questions for Auditor Parks? Senator Smallwood-Cuevas.

Thank you, Mr. Chair. And thank you for that thorough overview. I was just reflecting on one thing that just struck me was just the increase in claims that are coming in. That's good news for the State of California. And I just want to say in some ways we're a victim of our own success here. Right.

And you know, for me, what I'm not hearing is what were some of the key recommendations that have come out of the audit that can help really develop what is the formula. So if you're going from 800 to 47,000 cases, I can't remember one of the statistics. It was so dramatic. What is the formula?

Because clearly there has to be some scale on the infrastructure side. It's almost like setting a minimum wage but not tying it to inflation. It doesn't help you. You got to grow with the opportunity that folks need to fill the gap. So I'm curious in your, this is my first time sort of hearing the details of your work. Thank you for inviting me to the Joint Audit Committee. But are there recommendations, and I'm thinking that are really about, and I'm understanding sort of the qualitative piece of this.

But quantitatively, how would you recommend a formula created, be created for the state to think about as we grow and we should be growing more. We hope that these will be even higher next year in terms of the number of cases that are coming in, in particular in places like San Bernardino. I mean, that is remarkable.

So I'm just curious, what formulas do you have for us as policymakers to think about? Well, if we're increasing 200-400% in the number of claims, then what does that look like on the other side? I just think about growth and projection and forecasts and how policymakers, we need to be thinking about this.

That's just one overall sort of question that came to my mind. And I also wanted to follow up on the staffing. I want to know more about your recommendations and maybe how you're sort of tracking, not continuing to audit, but tracking this. But is there a way in which there's a tracking of the collaboration?

And I understand there's a DIR HR department, but I'm assuming it's connected to CalHR in some way. And correct me if I'm mistaken about that, but what is the collaboration that's happening to really diversify the ways in which folks are coming to the job?

Because you mentioned criteria, qualifications. And, you know, I remember being in doing community based workforce development and they would have a term like a clerk typist, like what is that? And who is actually being trained for something like that in today's, you know, labor market. Right.

So there's something about qualifications and titles and in addition to just what we pay them so that they're competitive. But I guess my question is what level of deep collaboration is happening? Because it's not just, my sense is probably, it's not just that people aren't meeting the basic qualifications.

The qualifications are sort of out of step with, one, the needs and two, where the market is in terms of people's skill sets and what jobs, even in the way that we describe them, people may feel that they're qualified for or not qualified for. So what are the recommendations that have been laid out around this collaboration?

What role does CalHR play in this versus DIR play in this? And again, how do your skill sets help us to think about ways to formulate a forecast for ensuring that we're keeping up with the growth and scale of the wage step? And then I'll come to my next questions.

So I think your question raises a number of things that come to mind, and I think it might get touched on by the Labor Commissioner during their presentation. Our understanding during the audit is they're currently going through a process where they're looking at the classification and the job specs for each of their positions to make sure that they are appropriately defining what their workers are supposed to be doing, what level of knowledge, skills and abilities are required to do that job. So I think there's a recognition by the Labor Commissioner that they need to take a second look at that.

It's important because that feeds directly into what I talked about just recently. It's those minimum qualifications that drive whether or not you can fill a position in state government. And we've seen where DIR has told the Labor Commissioner staff where, hey, I know you want to hire this person and you think they're great, but they're not meeting the minimum qualifications. And it raises a question, well, are our minimum qualifications set at the right spot?

So to the Labor Commissioner's credit, they're going through a process now, our understanding, to examine what should those labor job classifications, what should they entail and what should those minimum requirements be? To get to your question, though, about how do we handle the increase of 400 claims or 400 days to 800 days?

That really speaks to workload metrics. And I think agencies are responsible for managing their staff and setting expectations for how much work should you be expected to have your staff complete to be able to meet the demand that's on your office. I believe during the audit, Kris, you may be able to speak more to this.

We saw that there were expectations for Labor Commissioner staff where they were supposed to have, whether it was 40 to 50 hearings in a month or 40 to 50 settlement conferences in a month. That needs to be part of the forecasting and the analysis that the Labor Commissioner's office goes to. Because what this fundamentally all gets to is the Labor Commissioner needs to understand how many people do we really need to solve the problem.

And implicit in that is understanding what are our expectations for how much work a given employee should do, what are the qualifications that employee needs to have, and what salaries do we need to be setting to make sure that we're having those people?

We can not only attract them, but we can retain them in the jobs that we're hiring for. So I think those are the three main issues that we talk broadly in our recommendations. But it's primarily a staffing question and it's primarily a management question, and it's really specific to the Labor Commissioner and their role.

And I guess I'm thinking primarily, you have a view that's different. You're, as an auditor, my sense is that you are aggregating and you're looking at this at a different level. So I guess I'm going to put it back to you again. My question is, what is the recommendation from your audit to help us as policymakers think about what the forecast looks like depending on the quantitative data that you have? So that's, and I understand the Labor Commissioners, but you're the mathematician here.

And I'm hoping that this is what I'm asking is how do we think about how we formulate budgeting when we have an office that is growing? And I wasn't talking about the number of days. I was referring to going from 869 claims to 5000 in San Bernardino County. I was referring to going from 22,000 to 47,000.

These are tremendous. So there's tremendous. And whatever is happening, because we have fewer claims, we've invested in really engaging and educating and training, and clearly we need to do more of that. But whatever we have been doing is working.

And my question is, if there's a formula for how we're growing, what does that look like moving forward as we continue, and hopefully we will bring that staff that will help us do more than tread water. How do we think about formulating a budget that address the growth and the success of the work that is moving? So that was really what my question was. As an auditor, do you have recommendations on that?

During the audit, we did not do time studies, for example, of Labor Commissioner staff about how much time did it actually take to complete a claim. In your San Bernardino example, again, fundamentally, as more and more claims come in, as more and more work comes in, by definition it's going to require more people to adjudicate those claims.

How many people that's going to require, we did not come up with a specific formula to identify what those numbers are. What we did recommend to the Labor Commissioner is that they need to come up with that number themselves as they're managing the program.

And a big part of that input is understanding and setting expectations for, as you're talking to your staff and you're dealing with individuals that are dealing with 700 claims that they're managing at a time or 300 claims that they're managing at a time, what is a reasonable expectation that the Labor Commissioner wants to put on her staff for what is a reasonable workload?

You can't stretch your workers too thin. And so our recommendation to the Labor Commissioner is to explore those issues and determine what is the reasonable amount of workload that they should be employ putting on their staff. Because the more workload you put on your staff, the more at risk you are that you're going to have people that leave the organization, and it's going to continue to be difficult to both hire and retain individuals.

And I'm appreciating that. And, you know, as I say, this is my first time in the Joint Audit, and my expectation was that there would be more solutions. We clearly understand the problem, but what I'm not seeing are thorough qualitative and quantitative solutions that can help me as a policymaker understand this at a budgeting and a macro level, which clearly you're pointing to. This is the need, how do we get to, was it some, you know, just the 900 staff, if we were to do this the right way, to be able to hold the line on where we are and not actually grow.

So I'm appreciating the data. What I'm not appreciating is that I don't hear any real analysis and solutions rooted in the numbers to help us figure out this problem. And I'm certainly sure that we will work and closely with the Labor Commissioner. But it would be helpful from an auditing standpoint to have a little bit more direction for the legislators in terms of how do we actually address this problem and prepare for the continued growth in this space which is adding to the backlog.

My other question, and I will, and we'll get, I'm sure, to the HR conversation because I still am unclear how, and following up on Senator Cortese's point, I'm unclear about how CalHR and DIR, HR work together. I'm assuming this is a shared responsibility in working with the Labor Commissioner's office on these positions.

But I'm curious when you, what steps have you laid out that you think should be prioritized, particularly for legislators when we think about the enforcement unit and there ways to improve the collection rate? I'm still unclear what were the things that you identified? I understand the delay and the number of staff. My colleague from San Jose talked about retaliation.

I didn't hear from you in terms of, you know, what ways in which the Labor Commissioner's efforts are delayed, interrupted, interfered with, with issues like retaliation, with issues like not getting adequate documents on time from employers, issues like fear and having to work through that with individual workers who, you know, maybe have faced retaliation or now, you know, maybe walking back from a claim and then trying to bring them back to the table.

I'm curious what in your audit, in your conversations can point to, again, what are the policy changes that we can make as legislators to help address these delays beyond just the Labor Commissioner sort of doing a deep staffing assessment? Which is necessary and important. I'm not saying that it's not, but I am also trying to understand what are the other substantive ways that we can bring about solutions. And I didn't hear that in your review.

One of the things we recommend in the audit report is potentially expanding tools available to the Labor Commissioner, where perhaps they'd be able to impose liens on employers before a judgment is actually imposed on the employer. Similar to what we see with mechanic liens.

When we were doing our sample of 50 claims that were referred to the adjudication unit, I believe a subpart of that sample, six or so, involved mechanics liens, and the recovery rate for those mechanic liens were markedly higher. Where I believe four out of the six, or maybe it was five out of the six. I forget the number precisely where it was pretty close to 100% collection on those cases. And that's because the lien was able to be established upfront during the claim cycle.

Another policy area that I know is probably going to be very important moving forward is making sure that, when you do get to the judgment phase, it's not just the name of the company that we're dealing with. You need to know the people behind the company. You need to know who you're going after for those assets.

And so we talked to various individuals in the enforcement unit, and they indicated it was problematic to obtain assets on behalf of workers because they didn't always know who to go after. Who were those individuals behind those companies? So during the claim process and the adjudication process, upfront making more of an effort to identify who are those actual individuals behind those companies, so that you know whose assets to target when you actually do get to the collection phase. Kris, I don't know if you had more that you wanted to comment on.

Yeah, no, I agree with everything that the State Auditor said. But in terms of your question regarding whether we saw anything during the adjudication process, whether employers were getting in the way of providing documents or anything like that, we certainly anecdotally heard that that can take some time. However, in a review of 50 claims, that is not what stood out.

What stood out was just the delays in assigning the cases to the right people or assigning a case to a Deputy Commissioner who, before they even got to doing anything on it, left the job, and then it sat there until it got reassigned to somebody else. That was what was causing majority of the delays. So we didn't come across anything that you were pointing out, which is, you know, any intimidation or anything like that.

Well, having defended workers on wage claims. I want to tell you that is a major problem. So I'm shocked, quite honestly, to hear that. It makes me really question, you know, it's always like polling. Who are they polling? I often wonder. But I appreciate that assessment and, you know, and I appreciate some of the, those findings.

And I don't know if that can be aggregated in some sort of report, because I was just thumbing through your report, and I didn't see some of those other barriers that feed into delay. I think, you know, it's, it's not just one thing or another. It's a cumulative right of all of these things that help to delay the cases.

And I want to conclude, because I know I'm taking a lot of time here, but I want to just make a point about the budgeting and forecast, and I don't know if that's something that you do when you're auditing in terms of helping lawmakers think about ways to think about how do we scale for addressing growth in need in particular areas. But I was just looking at what we spent on law enforcement and, you know, we spent about $14 billion on our CDCR and we spent another $20 billion on funding police. That's law enforcement.

And I want to say what we spend on law enforcement to policing our work sites to bring dollars back into our economy is a fraction of that. So we need to understand, in the fifth largest economy, what is the fifth largest enforcement agency in the world that can help to police these job sites. And your analysis and help in trying to quantify that would be tremendously helpful. Thank you.

Thank you, Senator Smallwood-Cuevas. Are there any other questions for Auditor Parks? I think we'll move on to the next panel then. We have representatives from the Department of Industrial Relations, Director Hagen and Labor Commissioner García-Brower.

Thank you. Good morning, Committee Chairs and Members, for inviting us today to discuss how the Department of Industrial Relations and the Labor Commissioner's Office are working to improve the wage claim adjudication process. To help provide some context, the Labor Commissioner's Office, also known as LCO, is a division of the Department of Industrial Relations. We are also the department home of Cal/OSHA, the Division of Workers Compensation, and Division of Apprenticeship Standards.

DIR is a partner to LCO, supporting them so they can carry out their vital outreach and enforcement work. From helping scale recruitment and hiring efforts, evaluating automation and business process needs, finding additional office space in rural areas to better serve vulnerable workers, to partnering on strategies to hire more bilingual team members, and bolstering training opportunities for LCO staff.

During my tenure at DIR, which began the day of the stay at home order in March 2020, it has been my priority to lay out needed administrative policy and automation infrastructure that this department lacked. You may recall DIR lost its hiring delegation in 2019, in part due to insufficient policies and failing to align with merit based hiring requirements. This vital infrastructure supports the department's core mission to protect the health, safety, and economic well being of our workers throughout California's robust labor laws.

I'm glad to say that since those early days of the pandemic, our focus on building capacity has put us in a better position to address the challenges mentioned in the Auditor's report, as well as other operational needs LCO has identified to better serve workers. To start, the department has not only dedicated a unit to support the Labor Commissioner's hiring efforts, LCO has established its own administrative team. Both have doubled in size over the last year. These resources manage the large volume of recruitments required to reduce the vacancy rate in both HR and LCO.

I'm happy to report to you all that this is resulting in more hires. LCO has reduced the wage unit's vacancy rate by 10% over the last several months, meaning today there are 30 more team members helping process, hear, and settle claims. We are reevaluating the minimum qualifications for the Labor Commissioner's Office, Industrial Relations Representative, and the Deputy Labor Commissioner classifications to help expand the candidate pool and provide pathways that are more inclusive to a more diverse range of education and work experience.

We've launched a nationwide recruitment campaign specifically focused on enforcement roles, utilizing digital and out of home ads, as well as community outreach to amplify open career opportunities. This has resulted in a significant increase in applicants so far. Prior to the campaign launch, LCO received around 50 applications for Deputy Labor Commissioner 1.

In April and May, the division averaged 270 applications each month. These initiatives are only a snapshot of the efforts underway to improve this process and hopefully illustrate the multifaceted approach that we have underway to better serve California workers. I would also like to take a moment to thank the dedicated LCO team for their hard work and professionalism. These team members help California workers every day, and I appreciate them, and I am proud of them. With that, I'd like to pass it to Labor Commissioner Lilia Garcia.

Thank you, Mr. Chair, Members of the Committee. Thank you for having me here today to provide an update of the work we have continued to do since the March hearing to address the backlog in our wage claims, much of which aligns with the Auditor's recommendations.

I want to thank the Assembly Members and Senators who took the time to meet with me individually to to discuss these complicated issues in depth. The CSA's audit identified 22 recommendations, and those we have 19 current... We have strategies in place addressing 19 of those 32 recommendations, and we will continue to implement the CSA recommendations.

Prior to becoming Labor Commissioner, I spent 20 years fighting wage theft and fraud in the janitorial industry, and I was also exposed to combating illegal operators in car wash, fast food, domestic work, hospitality, and construction industries. I am both familiar and have experience with dealing with bad faith employers, predatory employers whose business plan is to evade the law. The CSA's audit findings reiterate frustrations workers and advocates have confronted for decades.

As documented in the audit, there was a 22,000 backlog in 2017 that was further exacerbated by the pandemic and post-pandemic effects, in addition to the vacancies, resulting in the current backlog of 47,000 cases. For several years we have been implementing strategies that are effective. However, they have been stunted due to the increased vacancies. I will share specific examples of strategies that have been successful in resolving cases and some with greater outcomes for workers.

Eventually, these reforms are addressing system inefficiencies and the end result will be a better functioning process for workers with outcomes. I will focus briefly on explaining reforms we have implemented and answering three main questions, what we're doing, how the strategy addresses backlog, and how these reforms contribute to the overall improved process for both wage claim and judgment enforcement. We're continuously working with our team to develop solutions. We've expanded concentrated conferences, as the Auditor has named.

We have expanded resources on naming all potential parties. We are redirecting resources and recovery strategies. So far we have found success. We are actually now, in the last two months, we are resolving more cases than claims that are coming in. We launched a concentrated conference program in August of 2022 to address the backlog in the San Bernardino office, as was noted in the Auditor's report. This included combining the San Bernardino office and the San Diego office to focus on the San Bernardino backlog.

These conferences combine staff resources to tackle the backlog by scheduling a number of settlement conferences within a month. This approach has been productive, and we reduce the San Bernardino backlog by 60%. Given this success, we plan to implement this strategy statewide. We've implemented other efforts to restructure the operations and staffing of the Wage Claim Adjudication Unit and promote greater efficiency to increase support for the claimants, as this is not a transactional process.

This is a difficult process for these individuals who are confronting their employer. And to improve the training and of our team to be able to do so. I'll be happy to go into details, but for in the interest of time, I'm going to be brief. Thank you to the Legislature for your support, as we received 32 positions in last year's cycle where we created intake investigators to contact claimants to be able to ensure that we have all the essential information to proceed forward. And this includes conducting research to identify all the potential parties.

Of these 32 positions, we have filled 22 of them, and they are having an impact, especially in their work of supporting claimants in naming and even in naming all parties. This is a powerful intervention, as our data shows that we are more likely to recover. We've also created more supervisors and managers to promote more sustainable oversight, as also cited in the Auditor's report.

Our enforcement team spends a significant amount of time supporting our statutory duty to provide public information support to thousands who call our information line every day. To allow enforcement staff to focus on enforcement duties, I've redirected 32 positions to create an intake, a public information investigator that will staff our public counters in each of our district offices. This will allow that our enforcement personnel be able to focus more on moving their cases.

We're also resolving more cases earlier in the process and holding more hearings. We resolved more claims in the quarter one of this year compared to the last quarter. That's a 20% increase. And we held 400 more hearings this quarter than in the previous. That's a 54% increase.

I'm hopeful that as we continue to fill vacancies, these numbers will continue to increase. Wage claim processing and judgment enforcement is not pushing paper. These are enforcement processes that confront systemic racism, exploitative business practices, and chronic poverty. Judgments are unique. Each employer is unique and requires different tools.

The audit did not look at, as the Senator Smallwood-Cuevas identified, the audit did not look at the characteristics of these claims, the characteristics of the employers and the claimants, nor did they look at, although they did identify the gaps in our data, which present challenges for us to be strategic in focusing on certain claims.

All of these issues impact how and what we are able to recover. Early engagement, engaging that employer, identifying them before they're able to go underground, before they're able to move assets, is critical. The reality that many of these vulnerable workers do not understand their rights means that it takes more time, as our team should invest deeply in ensuring that we've identified everything that's owed to these individuals and that we've named all parties. All of this increases our chances of being able to recover.

And that's why our program leaders have implemented an innovative program where we've redirected 18 professionals from our Bureau of Field Enforcement. So that's another department not in the Wage Claim Adjudication program. They have been trained and they have been able, in the course of a year, they've been able to focus on 2500 cases, resulting in the recovery of about $800,000. This is important because the legislative tools given to us, they need time.

We need time to be able to research them and ensure that we are pursuing all possible employers and not allowing employers to become judgment-proof. I want to clarify something that the Auditor commented. To just be clear, the comment was that it is problematic to apply liens and levies, and I would rather describe that as it's challenging.

Workers want us to use the tools available. The issue is the workers don't necessarily know how to use those tools. And so that requires more from our team. And that means we have to identify assets. We have to know all the entities associated with the employer, and that's information that the employee, that the workers don't have.

So we are investing deeply in supporting workers, and we are committed to continue to use all, if possible, resources. I'd like to thank Director Hagen and her team for supporting us throughout the process. And I'd like to thank our State Auditor and Mr. Patel specifically for their thoughtful work. Thank you.

Thank you, Commissioner Garcia, and thank you Director Hagen, too. I have a question. I think that gets to Senator Smallwood-Cuevas interest. What is the overall strategic plan that you have to address these voluminous findings in the audit, and how are you going to prioritize those? You mentioned that you had 19 initiatives of the 22 recommendations. And how did you decide which of those are going to be prioritized? And is there a document that we can see that shares your strategic plan to address these audit findings in a systemic way? And is there any forecasting that's being done?

You've got those encouraging statistics, most recently, number of cases that you've resolved and the number of hearings that you've increased. Are those sustainable efforts or are those just a triage? We're digging in, and we're going to, we need to change these numbers in the short term, is that something? And what will you need to continue that progress to get to where we would all be comfortable with what's going on?

Thank you, Senator. We do have our plans to move forward. We need to continue to do what we're doing, we need to continue to hire. These numbers will continue to increase and we'll be able to touch more cases with the more people that we have in place.

The Auditor has also identified unreliability in our data and data gaps. And so unfortunately, in my previous life, I would be able to capture certain information to locate flight risk employers, to identify up the chain issues that we'd be able to document, and to leverage the legal system to be able to recover.

In our office, we unfortunately do have automation programs that are in development, but our current data is unreliable, so I'm unable to apply that same strategy to these backlogged cases. We do have, in the process of our concentrated conferences, I could tell you we have about 4000 claims that predate 2022.

And so we are preparing to apply a concentrated conference program to be able to address those claims. So we're trying to get to the oldest ones first, and then we move forward. With our intake investigators, they are able to get on the phone and engage with employers.

So those claims where we have an employer that we can locate, then we are using that strategy to try and resolve them. But unfortunately, a lot of our backlog, we're unsure what claims are involved there. If this employer is still in operation, where the claimant is. This is part of the post pandemic effects.

So our intake investigators, their role with the backlog is to contact the claimants and to make sure that their claim is perfected. You may have read in the Auditor's report, we launched an online wage claim in November of 2021 in response to the pandemic, to be more accessible, as we should be, to the public.

And this online wage claim resulted in two things. A significant increase in our wage claims to 40,000 a year. The second thing, unfortunately, is the public filed claims with not enough information to allow us to advance. So we had a significant backlog that we had identified in 2022.

Since that launch had happened, 70% of our claims are filed online. So the intake investigators, we requested that funding from the Legislature to be able to go back and perfect those claims. So as you can see, that we do have strategies that are going to allow us to resolve claims and communicate with claimants and engage employers more quickly. Unfortunately, I don't have a deadline that I can give you, a target date. Although, we absolutely want to resolve these cases as much as possible. We know the longer it stays in the system, the harder it is for us to reach those resources.

Yeah, I think the most important thing is for the department and the Commissioner to be transparent about this. This has gotten to a point where it is a bit overwhelming, and I appreciate that you're being strategic and trying to tackle these things in the way that you can leverage your resources the best way possible.

But there's a confidence gap I think that is really important to address. And I think you will need to dedicate resources to having a transparent strategic plan that gives confidence to all the stakeholders that are involved in this process that you're going to make progress. It's understandable how long it's going to take, and resources are limited, and we don't have unrealistic expectations about this. But even the decision about going after the oldest cases first, I understand why you would do that.

On the other hand, is that the most efficient way to get justice for the most number of people in the shortest number of time? I don't know what the answer to that question is. But I do know that if those things are surfaced and transparent, there will be many people that want to comment on that.

And I think that more engagement from all the stakeholders can only help your work and build a case to get you the resources that you need to do a better job. I think that, to me, is the most important thing. Are there other questions for the Commissioner or the Director?

So thank you Mister Chair, and thank you for that overview. And there was something you said that struck me where you said we're resolving more cases than the claims coming in. I'm curious, is that because you are shifting where your sort of manpower is and is that the best solution? How do we do both?

And I'm concerned that we are finding ways to reach workers to file, so we're increasing, but I'm also concerned that we're starting to see this balance out. So I'm just wondering if you could talk, speak more to that and is that a short term goal? Will the new positions help drive claims and process new claims as well as resolve more cases?

That statement just struck me and I don't know if that's the best way for us to move forward because we want to make sure that those businesses that are playing by the rules have a level playing field and that means holding the ones who don't do it accountable.

The other thing I heard in there is that workers, there's a need for education, so they're coming in, but if it takes the staff as much time to actually fix the claim as if they had taken it themselves, then it's, you know, so what can be done around or what is being done to educate workers?

And I appreciate the problem of regionalism. Right. Every region is different. Every type of employer is different, every sector is different. So I'm just curious, how do you, how are you thinking about that? I know there was some piloting around, having sort of satellite or Regional Centers and partnerships.

So I'm curious, how is that also helping us address this so that claims can move faster because you don't have to spend so much time fixing them.

And then the third thing is, I heard you lay out, you know, the types of employers and when you said flight risk and when you said, I mean, it just speaks to the scale of what it takes to bring these cases to resolution. How are we educating employers of record? What are we, how are we articulating the liability? How is it real?

Just curious, what are some of the ways that, and I'm assuming, I know in construction, for example, there's a lot of consultation, there's technical assistance, there's all of that to help a contractor apply for or be protected through the procurement process and the winning of contracts.

I'm wondering if there's something with employees of record around, you know, what are the liabilities and how do you protect yourself and how do you make sure that you are on the right side of the law?

What does some of that look like, I mean, it feels like there has to be a balance between proactive and reactive enforcement. And if we're just talking about 32 positions that will require so much more.

And again, how are you thinking about that strategic plan and what you need from the Legislature to be able to meet all of these sort of converging needs?

Absolutely. Thank you, Senator. You said three. I have a list of about 10, but I'm gonna take them one at a time there. So you observed correctly that these 32 positions, that was. It's a pilot, right. We tested it. We've never had full time professional who focuses on perfecting claims. Right.

To specifically address that backlog from online wage claim. So they are facilitating this shift that we're seeing, that we're actually resolving cases by getting to workers and to employers early and recover. So part of that has introduced us looking at other non enforcement tasks that the wage claim adjudication team does.

And we have a public information line where we have 300 of our professionals on that line a year. So this is also something that I'm looking at of our need to return those 300 professionals so that they can focus on the cases that also contributes to our backlog.

So we're looking at, could we create a call center to create new jobs, new positions, to be able to respond to the public's need and to help them build perfected claims that could move through the system more swiftly. Then you asked about driving claims, and so that's a separate issue than an enforcement issue. Right.

I think I share your vision and expectation that we should be in a State of this size. It's interesting. We only have these number of claims, right. And workers cannot exercise what they do not know.

So part of that, to drive claims or to really give the power to the workers for them to understand their rights and how to defend themselves at work, which we have a duty to do. We have our reaching every Californian outreach campaign where we have about every year about 70 enforcement professionals who volunteer,

To do weeknight workshops, weekend workshops. I'm sure you've heard of our labor caravans, that now it's an effort with all the labor agencies participate on it. We also have community clinics because we have gaps of where our offices are.

So my service gap areas is the Inland Empire, the larger Inland Empire, and the Central Valley and the central coast. So we have been doing community workshops there in the last year, and we're actually going to be opening five satellite offices. We're going to open in Indio, in Coalinga, in Santa Maria, in Madera and in Tulare.

We're focusing in those rural areas to make ourselves available in those communities and at these clinics. Cal OSHA is at these clinics, Department of Workers comp. We're bringing the whole Alphabet soup with time to these clinics because workers have questions about injuries, they have questions about health and safety and these other issues.

So we want to collaborate internally to make ourselves as available as possible. Then you asked about workers educating themselves through this process. Last year, the Legislature granted us funding to create a community navigator program.

I modeled that program based off of a program that exists currently in Superior Court to assist non English litigants and individuals who are representing themselves. And so we actually have that contract in motion.

We hope to have somebody selected by the end of year, and we would refer cases to them of vulnerable workers, cases that need more attention, that they would educate them and help them prepare to negotiate their claim to represent themselves in the conference, in the hearing, and in recovery.

And the second part of that project is we're going to have them develop webinars that will be available on our website to educate workers how to prepare for a conference, how to calculate your hourly wage, how to negotiate a settlement, how to pursue judgment recovery.

Because a lot of what's in this backlog is individuals who were not prepared for the significant challenge of holding employers accountable. Then the last piece you asked us about how we're educating employers and to separate the reactive versus the proactive. So one component of our reaching every California campaign is a business engagement program.

I'm very familiar working with employers. Employers need to be at the table. They need to be a part of the solution. So we are prioritizing getting to small businesses. We have significant numbers that unfortunately, I don't have with me today, but I can share with you.

It's in the hundreds of thousands of employers that we're reaching and creating a safe space for them to understand their obligations and ask their questions. But on the reactive side, on our investigation side, we've also actually adopted, given the backlogs, we've also adopted approaches to inform the employer about our processes.

So we're doing more educational visits in the General industries that we hit. We just recently announced an operation in the warehouse industry where we did over 600 inspections to educate the employer about their obligation. Those who were not familiar with the new warehouse worker law.

We also sent out over 1,000 compliance letters to these employers to let them know this law is in place. And then when we do have an investigation against them, we set up a conference so that we can make sure they understand. We're not trying to play gotcha with these employers. We don't want to contribute to the delays.

So we want them to understand and have every possible opportunity to engage in the process and show us what records, what evidence they have. So we have been making significant efforts on both sides where it comes to workers and employers.

Thank you very much for that comprehensive overview and approach of how we do both of protecting workers, but also preventing violations in the first place.

I want to echo assemblymember Hart's points about ways for us to be able to document and track innovations and to ensure that there is enough capacity and resources to see these approaches that are showing dynamic improvement, to scale them. I would want to work on and with the Department on that.

And the last thing I will say is, this is so important to workers. This is so important to our most vulnerable communities. We have over 5 million workers that we know of who fall into Low wage, unregulated work. 30% of our working adults are in this vicious cycle.

And your agency is the only agency standing in the gap to ensure whether they really have a California future or not. And so I want to applaud your hearing and implementing and making actionable, even in this short period of time, the audit results and putting them into a to practice.

And I think, you know, it is our responsibility to make sure that the improvements happen and that you have the resources necessary to make them happen.

And I want to add one final thing, is that we know there's a lot of changes that are coming down as the state is looking at paga and looking at what are the ways that system will be improved. And there may be more need for your agency to step up and step in.

And so we want to make sure you are able to manage all of the pieces that are necessary.

And so, again, a strategic plan that really does lay out the capacity needs, the innovations that are showing promise, some sense of forecast that can help us ensure that we keep our eye on the prize of making sure that every family, no matter whether they're in a Low wage working situation or an unregulated work as a California future.

So I just want to say thank you for that report and looking forward to the strategic plans and next steps.

Thank you, Senator. Are there other questions for Members? Senator Alvarez, thank you very much.

Thank you. That's not the best microphone to use. Thank you all again for your testimony today. I'd like to ask some questions about the status of where we are today, primarily to the Commissioner. The Commissioner's office. What software is used to track the status of cases?

I may need the director's assistance, but we are on the salesforce platform and we also have an antiquated filemaker system that has information.

Do you know if it's antiquated? The answer is probably not. Is it possible to publish without identifiable information the status of your cases? Is that something that you track and that could be made publicly available?

We do have a wage claim search function and a judgment search function that the Legislature mandated over the last, boy, I think it's been over the five years.

Is this for individual cases or is this in the aggregate?

It's for the individual wage claims. But if there's through our bureau or through our licensing, if there's any judgment, it's a searchable function.

Okay, but there is no, and maybe the folks who were doing the analysis and reviewing the data is there, is there a system with publicly available data so we can understand and track where cases are as an aggregate in terms of when it was submitted, what status it's in? Is that information readily available to the public?

We do have in the salesforce system, we have all these requests fields in it. The issue is that we're not consistent in completing that data. Okay, Mister Patel can elaborate. Thank you.

Yeah, so the Salesforce database is an online system. Sorry, can you hear me? It's a system that is available to all the staff and I think you can export certain data out of it in an excel format and then manipulate it to take out certain information and provide certain key data that you're asking.

So, but in order for us to understand from even the legislative's perspective or the public, the only way to get that data and to be informed on how the future progress is going is to request it from the Department. There's no other way for us to know that is correct. Okay.

What is your recommendation about that and keeping that information up to speed for us?

Again, it's a system that contains a lot of confidential information as well as well as all the documentation resides within that system. So the only way to get it is to do an extract from it and then clean it up and then provide it. So you'd have to make a request to the, can I interject?

Yes, please. I think there's a few opportunities to get updates on how we progress. We will comply with the State Auditor's periodic inquiries for information as we work on our corrective action plan for the audit. And then we already have a legislative mandate to report on the status of wage claims on an annual basis.

So we could look at, if we want more detail in that, for example, we could look at modifying that. So we're open to providing the Legislature with whatever data you would like to see.

I think more than once a year is definitely the appropriate, at least, I mean, probably for an undefined period of future going forward, but certainly in the next one to two years. When was the last time you've been able to pull the data on the status on the average length of a claim?

Yesterday.

Okay. And you might have said that while I was unfortunately not here. What is the current status?

We've had, we've reduced by 200 days. So last year we were at 1,000 days and we're now down to 800, which is still not compliant with our obligations.

So the 895 average that is outlined in the Auditor's report, that was for what comparison?

Thru November of 23.

The Auditor went up until November of 23, I believe.

Okay.

And so you're now giving, sharing information with us post November. That's your current.

Yes. I asked for the statewide average up until May of 24 from the last audit. So we're at 800 days.

And given the sort of heavy weight we've given to having the personnel, I want to ask, last year, I know it was the first year, you went from having only 21. For example, industrial relations representatives grew to 56 authorized. So you had 41 vacancies. But that was the first year.

So, you know, it takes time to hire people. Where do you stand today as it relates to vacancies for the deputies?

For the deputies, we have about 70 authorized deputy positions, and I think we have about that. One doesn't have the.

Just to note to you, it's on page 57 of the full report, at least what we have, we have 81 authorized positions and deputies. Did that number decrease?

I'm looking at a report from the budgets office that I just received this week. And we have 77 deputy labor Commissioner one's. And then we have 70 DLC two s, which is the hearing officer. And then we have 28 DLC three's.

Which is the field office?

That's the supervisor. And then we have 58 industrial relations representatives.

Okay. So the only one that's just, they're not very off from what is in the audit in terms of authorized. So what is the, those are the number of positions you have authorized. What is your vacancy rate for each one of those?

So for the deputy labor Commissioner one, we have about 49, I'm sorry, 51 individuals.

Vacancies?

No, in place.

So we have about 28 vacancies there. And then for the two, we have about 30 vacancies, and for the three, we have one vacancy. And for the industrial relations representative, we're at 28.

Oh, okay.

So each of those are a little over 50% or so. But overall, for our wage claim adjudication team, of the 320 authorized positions, we have about 215 filled. So we're actually at the lowest rate we've been in a while. We're about 38%.

Okay. Last year, when we were discussing the audit, one of the things that was discussed was the need for individuals to do the work. But one of the things that we also discussed was what is going to be the measurement by which we determine that the caseload is appropriate.

And actually, I think you and I also had a conversation in person about this. What has been implemented since last year to try and get performance measures in place so that we understand what the expectations are for each of these positions.

So we have issued expectations memos and we are identifying. We looked at historical data and then we surveyed team Members to understand what is their capacity to move conferences and hearings. So we identified a minimum requirement of 30 conferences to be held a month. That's about 300. I'm sorry, that's about 480. That was 40 conferences a month.

About 480 a year.

Can you tell me what was the prior expectation?

Well, we didn't have a standard when I came in, and then the pandemic hit and stuff just got crazy. So we're looking at the historical data, and then we conducted a survey to see what folks were doing, because we're trying to establish a unified standard for all 17 offices.

And that's where we identified the 30 hearings a month and the 40 conferences.

And are you currently meeting all of those metrics?

No, we are not.

And what was the main reason why you are not?

Well, through the communications with the Auditor's team actually was quite helpful as they drilled down on certain issues, like the overallocation of our supervisors. So we don't have enough. We have some supervisors that have 20 deputies in their office. So it's just unmanageable. And this is something that our agency has never looked at before. Right.

So we've also seen we need to increase supervisors. Right. And we have done that. We've increased wage supervisors by nine. It's about a 50% increase. And we've increased regional managers by two. That's about a 66% increase. And in conversations with the Auditor's team, there's recommendations for more support that we need to provide.

Aside from the conferences and hearings to the Auditor's team.

I know the audit takes place over the course of months. There was input that was well received by the Commissioner and is being implemented on this issue of what I call performance metrics. The 40 per month for conferences, the 30 per month for hearings. Hearings. Thank you.

Is that a, is that a consistent metric with comparable agencies that do this work or do you have anything to share? Is this a number that you've believe is adequate and appropriate or is the number off with more need or less need?

We did not identify a comparable agency with similar workloads, so we weren't able to do that comparison.

However, we did talk to some of the staff about the expectations, and one of the things that anecdotally we heard is that in some cases, they felt that this was a little too much on their plate, trying to get this done along with everything else that's on their plate.

So in many cases, for example, hearing officers were noting that they didn't have time to write the decisions because they were trying to meet the 30 to 40 hearings that they had to hold.

So the 30 and 40 per month metric that the Commissioner has outlined as appropriate, you heard feedback from staff that that is not achievable.

Correct.

So then you weren't able really to weigh in on whether, what the right number should be?

That is correct. We know that they already have a lot on their plate right now, every hearing office or every deputy, but what is the right number that they can handle?

So to the Commissioner, I think you setting high expectations is absolutely the right thing to do and support you in that. How will you ensure that those expectations are actually met? I mean, we're already hearing that some of your staff is saying that's not something we can accomplish.

How are we going, I don't, I would hate to have you back here and saying, yeah, that was too much. And that's why we're still a thousand days or 800 to 1000 days behind that. We do not want to be in that situation. I know you don't want to be in that situation.

So how do we, how do, how are you going to successfully implement these expectations?

I appreciate that inquiry. I think the other issue that this impacts is morale and retention. So that's also something that we have to look at. We've had more team members leave our wage unit since we issued this expectation memo in 2021. Right. So that's a balance.

But part of the solution is we need more supervisors and managers, and we also need the IT tools available that helps them. Right. That they see that right now they see the Salesforce system as creates more work for them.

And so we are going through a business process review that we initiated last year, and we are looking at modernization for this system so that we can leverage it to help us do our job.

So at the end of day, this will be my final set of question. The end of the day, I think you sounds like you've got expectations, which means those expectations should pay dividends of these claims and people receiving their pay. That's what you're, this is what you're tasked with and that I think you are personally committed to.

And so as we receive information on the status of these cases and claims, which I hope if we have to do something legislatively, we should pursue that. If not, just getting that information directly from you all would be helpful.

And on information on a regular basis on the status of your 30, 40 expectations, which I think you're probably internally monitoring, I assume as we receive those and we hopefully start to see that really pay dividends, where should we expect to be a year from now in terms of the average time?

What is your expectation with those metrics that you've now implemented?

I want to get to the 135 days.

Is it realistic? I don't want to make a promise and over deliver or under deliver, excuse me.

You know, I'm not sure when this agency has ever met those 135 days, as the Auditor found. Right. This backlog existed prior to my appointment. Correct. However, we are improving the way we handle claims, and we want to remove tasks.

As you may have heard, there are other tasks on top of our enforcement personnel that prevent them, that distract them from prioritizing cases.

So if we, in fact, are able to fill these positions, if we are able to gain the system modernization, if we're able to bring new positions to handle our public information duty, then I think we're gonna be at an environment where the 20 individuals the Auditor spoke to who communicated concern about this, they don't have all of these tools right now.

Right. So they're in the thick of it, doing the really heavy lifting. So I think that, you know, we actually will be able to tell you, aside from addressing the backlog and processing claims more timely, we'll be able to give you a more informed evaluation of what's possible.

Because what's possible for a simple claim that's fully documented that the employer's showing up, that can possibly work. Right. But there are so many claims that it's cash economy, the employer's not showing up, workers are not responsive, and I don't believe we're serving the public by closing those claims simply because we're past the statutory requirement.

So to hold each other accountable, both you and ourselves and for the public is at the end of the day we're public servants. If, I'd like to hear two answers from you. If you had all those tools, you think a year from now you'd be at 135 days in terms of adjudicating claims.

If you don't, if the status quo is what it is today and you're not able to get any additional tools, but you have several vacancies to fill, and you, I think at least on that front, you're able to fill the vacancies.

Second answer is what will be if it's a status quo, what should we expect to see next year in terms of the time it takes for the claims?

I think we need a yes on every strategy to get to the 135 days correct, including the recommendations and evaluation by the auditorium. If we don't, but if we don't.

Give you those tools, whatever a part of that that is our responsibility, then at least the accountability exists that we did not give you the tools, therefore you're not able, and then we can have that conversation. We're still delayed and then we'll all be responsible.

But I'm saying if you don't receive those tools, what should we realistically expect? You did already shave it down a couple hundred days, right? So something's working. What do you think a realistic expectation for us is a year from now on where this stands?

And just to clarify, the reason we are able to reduce the 200 days is because we got additional positions. Right. I think if we're not able to get the tools and the positions that we need, then we're likely going to be looking at a two year process. Okay.

Thank you. I appreciate that very honest response.

Thank you very much. Thank you, Assembly Member Alvarez. Assembly Member Ortega.

Thank you. I apologize for leaving earlier. A couple of us have to be in three places at once around here, so, but I did have a question going back to my opening statement, and I apologize if this has been covered already.

I still have a concern that even if all the vacant positions are filled, that the problem is so vast for so many years that it's not going to be enough to get to where we want to see ourselves in a year. So have your office thought about alternatives?

Whether it's incentives for employers who are doing the right thing or empowering employees to do some of this enforcement themselves, what are some alternatives, if any, that you've considered or thought of.

Thank you so much, Member Ortega. My duty is to enforce the law and to exercise the tools provided to me by the Legislature. I'm not allowed to go outside of those tools, but I will share with you some strategies that we have been implementing to get at exactly what you said.

And we did have this conversation earlier with Senator Smallwood-Cuevas, that we have a duty to educate workers and to, if they do not understand their rights, they cannot exercise them. And if they don't know how to, they also aren't going to be effective what they do at work. And so we have been implementing an aggressive outreach campaign.

As I believe you are aware, we've been conducting community clinics in our service gap areas in the Inland Empire, in the Central Valley and the central coast. We've also been working with community leaders who are a bridge. They are trusted in their communities. They have expertise around the industries.

And what's most valuable is they have relationships with the workers. They will likely not come to us, but they will go to the community. So we've expanded those partnerships. We have a strategic enforcement program that we do on the bureau side where we also work with about 11 organizations in strategic industries to build cases.

So everywhere we can, we need community partners. The job is too great right to get that. And we've also been amplifying all of our outcomes. We've been doing public distributions, which this agency did not do.

But given the impacts of the pandemic, we were doing public distributions so that people can see, people like them actually get to win and are moving forward their cases.

Are there other questions from Members? Well, thank you both. Appreciate the information. We're going to move to our last panel, which is Caitlin Vega for the General counsel for the California Labor Federation. Thank you for your patience.

Thank you, Mister Chair, Mister former Chair. Former and current labor Chairs. Really appreciate this opportunity to be here with you all and talk about what is such a critically important issue to the working people of California. My name is Caitlin Vega. I'm the General counsel at the California Labor Federation.

I've been here for 20 years working on the issue of labor law enforcement. There were references earlier to the fact that we did not support an audit. And I want to explain that. Last March, when JLAC first considered this audit, we said there is a critical problem of vacancies.

They have vacancies between 35 and 44% in each of these key divisions. We would like to see the Legislature push forward emergency hiring with an expedited hiring process. We were concerned simply that an audit would delay taking what we viewed as really urgent action to fill those vacancies. Unfortunately, that action was not taken until very recently.

We were told this week that there has been an agreement.

We were party to an agreement that the Administration is going to move toward providing emergency hiring authority to the labor agency, which is something that we have been advocating for for a couple years now, and toward developing a hiring process that gets to so many of the issues that Senator Smallwood-Cuevas raised, which are about what are the right minimum qualifications?

Why are we disqualifying people? So, all that said, we did not support the audit. I thought there were some really helpful findings in it.

I wish we had moved a year and a half ago, but I'm really happy to be where we are now to be moving forward with the emergency hiring and to have some of the really important information that came out in the audit.

They actually looked at situations where candidates were being rejected based on minimal qualifications and found that in a lot of cases, that didn't make sense.

We should be thinking about the critical mission of this agency and who are the right kinds of people to be out there trying to ensure that workers are paid for the work that they do, trying to educate employers, trying to be accessible to people who have language barriers and other kinds of barriers.

So we are pleased to be in that position, but also very grateful that this Committee is giving this, the serious attention that it needs. A recent report came out about a week ago, sorry, maybe two weeks ago. It was from Harvard University and UCSF on this issue of labor law enforcement.

They surveyed service sector workers in California and found that 46% of them had experienced labor law violations. Out of that group that had experienced labor law violations, only one quarter of them reported it to anyone. And in almost every case, they only reported to a supervisor or a manager. Only 1% reported to a state agency.

And I think that's critical to understand that this backload we're, this backlog that we're focused on is a tiny drop in the bucket compared to what workers are experiencing every day.

And that the realities of retaliation, of threats of deportation of employers, you know, sending a signal to workers that they don't have the ability to speak out, that there will be consequences if they do make it incredibly hard for workers to come forward with these claims.

That's why it's so urgent that when they do, it is a process where they find justice, where they get a timely resolution. And so that's why we have focused so much on the urgency to fill these vacancies and to find people who will be committed to the mission of the agency.

In addition, there was a lot of talk about volume of cases. 80% of Non Union workers have to sign forced arbitration agreements to get their job. That means they have no ability to bring, you know, what used to be the tool of the Low wage worker, the class action lawsuit.

The reason for that is that workers could aggregate what are small individual claims because they are Low wage into one case that would be powerful enough to go up against a big corporation. Workers now have to waive that even to apply for a job at a fast food company.

You have to check a box saying, I waive my right to take my employer to court. That is a big reason that we see this kind of volume and that we are now expecting the labor agency to take on a role that was not previously contemplated. All of that, of course, means the labor Commissioner's office is essential.

And I'm so appreciative of the time that all of you are taking to help us think about how we strengthen and rebuild this agency when it comes to hiring. I mentioned some of the issues around minimal qualifications. I think there are a number of things that could be streamlined. Duplicative testing, unnecessary testing.

If someone's a lawyer, they're a lawyer. Why do they need to take another lawyer test? If someone's bilingual, is it essential that they speak a certain kind of formal language that may not be spoken by anyone that they're going to be working with in the labor Commissioner's office?

The staff of the labor Commissioner's office should not have to demonstrate every single position that needs to be bilingual. We should just accept, of course, we need bilingual staff, and we should cut out those kind of delays in the process so that we're able to get people off before they find other jobs.

Of course, hiring is only one half of the problem. We have a huge retention problem. As soon as they hire and fill these positions, no sooner than they hire and fill, we have staff leaving. That's because not only do they make less than in the private sector, they make a lot less than workers do at other agencies.

They also have less promotional opportunities. I have talked to countless staff within the labor Commissioner's office who talk about how hard it is to be stuck at a place where they are not able to promote.

If they do, it causes another vacancy, and so they're leaving to other agencies, even when working at the labor Commissioner's office is what they love and where they want to stay. So we have to think about recruitment. We have to raise those salaries.

We have to find ways to keep the great staff we have as we are recruiting. And then we also need to think about, there was some discussion in the audit about the impact of new laws. I have worked a lot of these years as a lobbyist in this building.

You may all have heard the arguments we should never have a private right of action. No one should ever be able to sue themselves. Everything should just go to the labor Commissioner. That's a common refrain we hear from the business lobbyists who oppose a lot of the labor laws that get passed here.

But we have to be conscious that there's a toll when we make laws enforceable by the labor Commissioner only, again, we're adding to that volume without thinking about how we're building the infrastructure and whether there is any plausible way for them to meet that need.

We should be working with the agency to make sure they have all of those tools to both enforce and collect and ways to simplify the process. We should continue to think about when we do labor laws that they include requirements that allow us to identify the responsible parties.

We've seen a huge growth in contingent work in the state, the use of labor contractors, and in all of those settings, it becomes much harder to hold the right person accountable.

And then lastly, I just want to say I am very grateful to the Auditor for doing something we don't get to do very often, which is step back and take a look at this agency and say, why are we talking about 30 positions here? We should be talking about 892. That's right.

And we have fought every year for small additions to the budget, and let's get 15 more people in retaliation, and let's get 30 that can help on intake. The reality is we are a huge state.

We have a large immigrant worker population in this state that are often in Low wage jobs with a high rate of labor law violations. We have all of the levels of contracting, and so we should be investing in an agency that is able to, that has the capacity to protect the workers of this state.

And as you mentioned earlier, Senator Smallwood-Cuevas, we owe it to all the employers that follow the law to show that there are consequences when employers break the law.

And that's why we have to support the work that this labor Commissioner is doing to expand outreach and enforcement, and we need to continue to strengthen and invest in this agency. Thank you.

Thank you very much, Miss Vega. That was very helpful. Are there questions for Miss Vega? Senator Smallwood-Cuevas.

Can someone, what is the current budget of the labor Commissioner's office in this cycle is your current total budget.

129. Okay. But I could confirm that for you. Okay, I just want to say the City of LA spends 338 million on parks.

I think it's about 129,000,000.

129. Okay.

But I could confirm that for you.

Okay, I just want to say the City of LA spends 338 million on parks.

So I don't know. I feel like I understand what we're doing here, but I don't understand what we're doing here. And it speaks to our lack of investment in enforcement in this state where we are spending the people's money, but we're not spending it in a way that is helping us deal with and solve the problems that our constituents are looking to us.

You know, I'm curious of all of the resources that are being lost to wage theft, what does that mean in terms of income tax? That we need to run the state. We're in a deficit and I'm going, and I have 10 years left, and I'm going to be dealing with this deficit from this year.

Over the next five years, you and I, many of us will be. We need people to earn a living and to pay into the system. And in order for us to make that money, we've got to spend the money that's necessary to ensure that we are protecting as many Californians as possible.

But we have a rubric for enforcement that actually works to raise the floor for so many families. So I appreciated the analysis and the appreciation for the audit, but I think there's a much bigger question that we have here. Is law enforcement is as important as parks and recreation?

Does the State of California put our money where our laws and our rhetoric is? And we need more receipts, that we are making the right investments and making a return. This is where we need to make the return. So this is where we need to be investing. So I think we have a lot to think about in terms how we're budgeting and what enforcement means to us.

Mister chair, if I may, I do have an updated number. I was off that we are at 239 million, still significantly less. Right. And the personnel is 112 of that.

112 ftes. No, million. Million. That's the number. 100 million. Thank you. Thank you.

Thank you. Senator Smallwood-Cuevas, Assemblymember Ortega, thank you, Senator.

And thank you, Miss Vega, for your testimony and recognition of your many years of working on these issues and really prioritizing workers, and especially those who are Low wage workers, who are often in the dark, who are the ones whose wages are being stolen and who don't have justice.

And I think what we're doing here today is actually prioritizing this issue.

That's what I'm getting out of this audit is finally, we are actually prioritizing something that should have been prioritized a long time ago, hoping that this is not the last of hearings, just like we did with the retail theft, that we actually have several hearings to really dig in deep and make sure that we are providing justice for all Californians, whether it's the employers or the workers, and making sure that we're recovering the millions of dollars that are still out there.

I think, you know, when I had my other hearing, I kept hearing the issue of the vacancies. And I'm glad to hear that finally, after this audit came out, after I requested another audit, after that hearing we had there, we're actually seeing movement because it is a question about priority. Do we want to prioritize this or not?

And I think we're pushing and we're going to continue to push to make sure that this issue continues to be part of the conversation, prioritize and that we deliver, because it's not okay to be the fifth largest economy in the world and have the issues that we've been talking about for many, many years.

This vacancy rate has not been new. They have happened over and over again. The amount of money that the Department gets is not new. And so what is it that we're going to do that is new? What is it that is, and that was kind of the questioning that I had.

What is it that we're going to do that is different, that is new, that is going to lead to results and deliverables for all workers in the State of California. Thank you.

Are there any other questions? Chair Ortega or chair Smallwood-Cuevas, would you like to make any closing comments? I thought that was, it was very.

Effective, too, and that was my closing.

Okay, great. Assembly Member Ortega, do you, or, excuse me, Alvarez, do you have any closing comments?

No. Just, again, want to thank you for continuing the work on this front and for having this hearing for the two chairs, for your commitment and passion to this and to get to the end result, which is let's do justice for people.

And these are the most vulnerable people in California and the quicker we do it, the better their lives will be and the better California will be. And so I look forward to the updates, the regular updates on the progress.

I think we need to hold ourselves accountable and I think we know what the task is ahead, and you have a commitment for me to support that work. Thank you Mister chair. Thank you.

And I want to make sure we have time for public comments. So if anyone would like to come up to the microphone, please share your insight.

Chairs, Committee Members and staff, my name is Dean Grafilo with capital advocacy here on behalf of case, the union that represents the thousands of attorneys, administrative law judges and hearing officers in state government.

First of all, much praise and thank you to the California State Auditor and team on this report and JLAC Senate and Assembly labor committees for this oversight hearing.

The breadth and focus of today's hearing are matters that case knows all too well and welcomes partnering with all stakeholders in order to identify a path of creative problem solving for the LCO and beyond. As the saying goes, justice delayed is justice denied.

And as the rank and file Members directly involved in carrying out justice for thousands of Californians annually at LCO and the entire state government, case membership is more than concerned with the LCO's ability to achieve its mission. In the most Frank terms, the backlog impacting Rio Californians is unacceptable.

Case has known long before this report and appreciate corroboration by the State Auditor that inadequate staffing is the primary reason for delays at lcomplication and is equally important. This is directly tied to poor compensation for case membership and inefficient hiring practices at LCO.

I'll underscore I'll underscore at its core, a path of creative problem solving must include increased staffing, increased compensation, and improved hiring practices.

Whether this means geographic or retention pay strategies, improving safety in the field, or caseload caps, case Members stand ready to partner with the Legislature, Cal, her, CalhR, and the governor's office to get on such a path that will best serve each and every californian. Thank you.

Thank you very much.

Good afternoon. Rachel Deutch with the California Coalition for Worker Power. We many of the organizations in our coalition refer cases all the time to the Labor Commission Commissioner's office and work collaboratively to bring strategic cases.

Just this week, there was a $6 million citation of Amazon for violations of the Warehouse Worker Protection act that was referred by the Warehouse Worker Resource center.

So we continue to view the labor Commissioner and her office as a national leader in strategic enforcement when given the appropriate tools and staffing to pursue these strategies, we want to speak in support of many of the solutions that have already been mentioned, including efforts to address the salaries that lag other public sector employees by nearly 30%, including retention pay and geographic pay, and are also very excited about the opportunity to expedite hiring.

We also want to take a close look at these minimum qualifications and really work towards a day when people who have direct lived experience in high violation industries are also able to contribute to the enforcement landscape and to find jobs within the Commissioner's office.

We also want to speak to judgment enforcement tools the use of prejudgment wage liens is something that Members of our coalition have advocated before and that this Legislature has rejected.

We now see states like Washington and Maryland that have taken leadership ahead of the State of California in terms of expanding use of prejudgment wage liens, and that is a very effective and targeted solution. It is not acceptable for workers to come forward, participate in an enforcement process and not deliver that money.

At the end of the day, it is not appropriate to waste resources in an adjudication process when we can't recover that money for workers. So that's a very important tool. And then with respect to deterrence, we are going to let workers down if we continue to look at enforcement as chasing after bad employers.

We need to create a culture of compliance where every employer is incentivized to invest proactively in understanding their obligations and maintaining their obligations to workers.

And the only way that we do that is if we substantially punish violators and we send a message that everyone understands that it is a better business strategy to invest in compliance than to take shortcuts or to steal from workers. We are looking at reforms to the private Attorney General act. Assemblymember Ortega asked, what are the solutions?

Since the labor Commissioner cannot do it themselves and PagA has been the solution, right? Especially in terms of the rise in forced arbitration that we heard about from the Labor Federation.

So when we we have to closely monitor whether Paga continues to be as effective a deterrence tool and we have to look at additional strategies to supplement paga going forward, that means we need high, higher citation amounts and we need to really look at whether we can allow employers that repeatedly ignore workers rights to continue operating in business.

Lastly, wanna continue to mention that the strategies that were discussed around community partnership, we see innovations like the California Workplace Outreach program, which is something that the Department of Industrial Relations has innovated, that has helped us to look at compliance more holistically.

We should not be only measuring it in terms of how many claims are filed, when we can invest in workers ability and organizations ability to help achieve informal resolution. By educating workers and by educating employers and bringing employers into compliance proactively, we are going to win for workers.

So let's continue to invest in programs like CWAP, the domestic workers employee outreach program, to again achieve this goal of compliance that goes beyond the number of claims that are filed. Thanks.

Thank you very much.

Good afternoon, Committee Members and chairs. My name is Ellen Love. I'm with the workplace Justice Lab at Rutgers University. Our team researches local, state, and federal labor law enforcement best practices and consults with labor agencies across the country on how to effectively implement strong and meaningful labor standards.

I wanted to start by noting that the wage claim backlog discussed today is a critical issue for California workers. But I also wanted to provide the perspective that it's something that labor agencies across the country are struggling with.

It's an issue that plagues virtually every complaint based labor standards enforcement agency that we work with at the state level, and we've seen huge surges in complaints and claims in states that have set up online complaint filing system similar to the one discussed today. So the reasons for these backlogs in states across the country are complex.

But as the Auditor noted at the California Labor Commissioner's office, the primary issue is under staffing. So we wanted to applaud the new solution that will allow the LCO to do expedited hiring. This is a hugely important first step. We also wanted to address the problem of Low salaries that fail to attract qualified candidates and undermine retention.

There's reason to believe that otherwise qualified candidates are taking jobs in California with other enforcement agencies. So to add to the Auditor's report, our research shows that the salaries for comparable positions and other labor enforcement agencies in California are between nine and 55% higher than similar positions at the labor Commissioner's office.

So we would urge the Legislature to provide the support needed to streamline the study and revision of classifications and salaries, and we've provided our research on comparable salaries in a written comment that we submitted today. Finally, we wanted to address the timeframes for the wage claim adjudication process.

We know of no other examples where a Legislature has required adjudication or investigation on such short specified timelines. With so little flexibility, such restrictive timelines can actually undermine enforcement efforts, especially in cases involving Low wage workers in exploitative industries where effective enforcement is most needed.

We would in particular urge the Legislature to look at the intake process where the labor Commissioner has made big strides in creating new intake positions.

We think that, that, you know, our view on being able to effectively address a huge influx of cases is that the intake process is critical and that the labor Commissioner's office needs sufficient time to review process. Make sure all of those claims have all of the information that they need to make it through the process.

I'll leave it there. Thank you for your time.

Thank you for your comments.

Good afternoon and thank you. I'm Matthew Miller. I'm the senior field representative for labor compliance with the Norcal carpenters union. And we are an organization, we advocate and file cases on behalf of workers with the labor Commissioner's office.

And I want to thank the Legislature and the auditors for helping bring light to the serious issues of wage theft and its enforcement in California. We at the Norcal Carpenters union just said that. Sorry. And we really appreciate this audit.

We understand that it's seriousness and the fact that it takes a long time to come to a conclusion in a wage claim. We do think these problems existed long before the current labor Commissioner and Director took their respective positions.

And we've seen a strong effort from the labor Commissioner and Director to both collaborate with us and to address some of these problems. Examples of this are the workers Rights Enforcement grant and AB 494, which gives prosecuting attorneys authority to enforce labor code. The labor code.

Because wage theft is a serious crime that hurts both workers and fair employers, we at the NCCU recommend that the Legislature and budget reflect these issues and support giving the labor Commissioner's office the resources it needs to help stop these crimes.

And one example would be adding criminal investigators to the labor Commissioner's office to appropriately fight wage theft for the crime that it is, and as a felony. Thank you.

Thank you, Mister Miller.

Hi, I'm Daniela Urban. I'm from the Center for Workers Rights, based here in Sacramento. I'm also speaking on behalf of the Santa Clara County Wage Theft Coalition. I'm here today as an attorney and an advocate who has handled hundreds of cases at the California Labor Commissioner's office to fight wage theft.

And I urge you to continue to support the labor Commissioner and the wage adjudication unit, specifically in reaching the necessary staffing levels to combat pervasive issues of wage left in California.

The LCO's process in the wage adjudication unit is unique in that it allows the workers themselves to come forward and share their experiences about their hours worked and pay received, without the need for an attorney or extensive knowledge about their rights.

This accessibility is crucial for vulnerable workers who otherwise would remain silent and would have no access to justice. I encourage you to not look too closely at the numbers and metrics and be only looking at the numbers of backlogs going down or the number of staff going forward.

These metrics are important, but we also need to be looking at what justice is coming out of the Department and not just at the numbers. These are workers with stories and experiences, and we need to be thinking about the impact it has on their lives and the amount of time needed to invest in those claims.

Evaluating a wage theft case is a time consuming process. In my office, we spend an average of 15 hours doing a task that a deputy, one would be expected to do in the settlement conference, where in the audit report, they're given just between three and 4 hours to complete.

So although we support the labor Commissioner in setting these metrics, we hope that they expand the amount of time allowed to investigate these claims. Just to use an example of how these claims proceed, in the conference, we had five workers last Saturday at our wage claim clinic. One came with just a bounce check issue one check.

That was it. They left with over 16 different violations of the labor code. And that's what happens when you start to talk to a worker about their experience.

So to expect a deputy to complete that in three to 4 hours for a worker that worked for three years, for an employer who was violating such consistent applications of the labor code is unrealistic.

So we need to make sure that we are not just focusing on the decrease in the backlog, but how many workers are receiving justice. And in order to do that, we need to hold employers accountable. Many folks have talked about the pre judgment liens that would be necessary to hold employers accountable.

But there are lots of other tools that advocates and the labor Commissioner have thought of in order to make sure that employers engage early in the process. They're not currently required to attend the settlement conference.

In my experience, most do not, which means it has to proceed to hearing in order for the claims to continue and for justice to be served. Employers, before they hire for most industries, do not have to show any ability to pay those workers, so employers will hire knowing that they're unable to pay.

And all of these are tools that the Legislature has to combat wage theft on a broader level, decrease the claims that come into the labor Commissioner's office and give the office more tools to handle these cases more quickly. I want to echo the sentiments from from everyone about the hiring and the need to expedite the hiring process.

We actively help recruit folks to work at the labor Commissioner's office and have seen firsthand how long it takes. We also believe that in any hiring process, as we do in our office, if you're not getting enough candidates, you need to pay them more.

So increase the amount that the labor Commissioner staff is receiving, and that will help fill the vacancies and certainly help with retention.

I am glad that the Legislature is paying attention to this crucial issue, and I, as an advocate, am open and willing to discuss any of these potential solutions in more detail so that we can have an active program in combating wage theft in the next year. Thank you.

Thank you, Miss Urban.

I think that concludes our public comment, and I want to thank everyone for a very informative and, I believe, productive discussion today. The size of the problem described today is intimidating. Too many Californians, victims of wage theft, are counting on us, counting on you, the labor Commissioner, to get this right.

Wage theft is a crime, and victims of wage theft deserve justice. Some of the things that I noted when we first began the hearing, when folks were making their opening comment, I think are particularly timely to remind us about now at the end, Senator Laird asked, what specifically will be done to fix this?

We've heard things today that will, I think, encourage us. Assemblymember Ortega said, this session of the Legislature, we've focused a lot on retail theft. Why haven't we focused more on wage theft? And I think today we're starting to do that. Hopefully that is sustained.

Senator Smallwood-Cuevas said, we need to look beyond the statistics to the impact wage theft has on workers whose wages are being stolen. And one of the public commenters said that very eloquently, too. Senator Glazer asked or insisted that this audit can't just sit on a shelf.

We have to take these recommendations and turn them into action and appreciate the Auditor for bringing those recommendations forward and assembled in Alvarez, I think got to the whole point of what the Joint Legislative Audit Committee is about when he said that audits make us better.

It's one of the few tools that the Legislature has to get under the hood and understand what isn't working. And he asked, has anything changed this year? And it sounds like in the very near term things have improved, and then where should we be a year from now? And that really is the question for all of us.

We want to be in a much better place a year from now. I know that Assemblymember Ortega, in her role as chair of the Assembly Labor Committee and Senator Smallwood-Cuevas as chair of the Senate Committee, will continue to focus on this issue and be diligent and attentive and aggressive about seeking changes.

The Audit Committee will also be monitoring efforts to fix these issues, and we all stand ready to help the Department to make the improvements and get the resources that they need to do the right job for Californians.

I want to thank the State Auditor and his staff for their contribution today, as well as their very hard work in completing this audit. I also want to thank the Department of Industrial Relations representative, Director Hagin and Commissioner Garcia here for being here today.

And also want to thank the representative from the California Labor Federation for being here. You all added a lot to the discussion. Thank you all for your attendance and your testimony. And with that, the hearing is adjourned.