2015 California Legislative Roundup
The California legislature has taken significant action in its most recent session, which concluded earlier this month. Several key bills signed into law by Governor Brown will protect port truck drivers by providing increased enforcement measures (SB 588 and AB 970), tightening up rules on piece rate pay (AB 1513), and expanding retaliation and discrimination protections (AB 987 and AB 1509). Further, AB 621 provides incentives for companies that come into compliance with the law and reclassify their misclassified drivers.
The governor missed a critical opportunity to protect port drivers’ access to the wage claim process with his veto of AB 465, which would have prohibited mandatory arbitration clauses. However, in sum, the state has enacted measures that will strengthen efforts to legitimize the port trucking industry by adding tools to combat misclassification and providing an amnesty program for companies that no longer wish to misclassify their workers.
Bills Signed- Effective January 1, 2016
SB 588 (De Leon)
As amended on September 4, 2015, this comprehensive bill makes three substantive changes that increase workers’ ability to collect on a wage claim judgment.
• First, it requires employers with outstanding judgments for nonpayment of wages to either settle or post bonds of up to $150,000 until satisfaction of the judgment, and authorizes the State Labor Commissioner to issue work-stop orders against employers who fail to do so. The required principle sum of the bond is specified in three tiers, depending on the size of the unpaid judgment. Furthermore, this bond requirement closes corporate loopholes: it applies to both successors and individuals “acting on behalf of an employer,” which includes the “owner, director, officer, or managing agent of the employer.”
• Second, SB 588 “sheriffizes” the State Labor Commissioner by authorizing it to enforce nonpayment of wages by issuing a lien or levy on an employer’s real or personal property in order to collect unpaid wages for the employee. In a role previously reserved for the county sheriff, the Labor Commissioner is allowed to directly levy bank or otherwise send out its own officers to execute collections.
• Third, this bill subjects both entities contracting with the employer for property services and long-term care facility industries to joint and several liability for the unpaid judgment when notice requirements are met.
This new law can drastically alter the post-judgment legal landscape. By expanding the Labor Commissioner’s capacity to collect and extending the scope of liability to individuals and successors, this omnibus bill can effectively deny efforts by unscrupulous port trucking companies to avoid wage liability by manipulating the corporate form. The work-stop order provision may also curtail the time it takes to collect a wage claim judgment by imposing an end-of-the-road remedy when wage judgment debtors fail to comply in a timely manner. For companies that are complying with the law, the enactment of SB 588 provisions is good news: bottom-feeder companies that skirt the law will now have tremendous pressure to either legitimize their businesses or face a work-stop order.
AB 970 (Nazarian)
This bill expands the scope of what the Labor Commissioner is allowed to investigate. As amended on August 24, 2015, this bill will amend Sections 588, 1197.1, and 2802 of the Labor Code to allow the State Labor Commissioner, upon requests from local entities, to enforce local laws pertaining to minimum wage and overtime hours by investigating and issuing citations where the local entity has not already done so. This measure becomes effective on January 1, 2016. AB 970 also closes a prior regulatory gap by now authorizing the Labor Commissioner to investigate and issue citations for failing to indemnify or reimburse workers for business expenses.
Previously unable to investigate and issue citations for these business expenses, the Labor Commissioner’s Bureau of Field Enforcement (BOFE) can now investigate port trucking companies for these violations. Because the predominant port trucking company model imposes truck expenses such as fuel and insurance on commercial drivers, this bill enables BOFE to impose potentially astronomical citations against noncompliant companies. Furthermore, citations for failure to pay minimum wages will be assessed against a local minimum wage, if applicable, further driving up potential liability if the Labor Commissioner launches a BOFE investigation against a port trucking company.
AB 1513 (Williams)
This bill codifies recent court precedent that imposes strict requirements on piece rate compensation schemes. By adding Section 226.2 to the Labor Code employers must, apart and separately from piece rates, compensate employees for “nonproductive time” and rest and recovery periods. Rates of compensation for nonproductive and rest and recovery times must follow applicable minimum wage laws. The bill also creates a safe harbor provision for employers to either cure or compensate employees for present violations.
The day-to-day duties of commercial drivers include numerous activities that are arguably “nonproductive,” including pre-trip inspections, on-call time, and delays within the ports. Instead of incorporating time spent fulfilling these duties in the piece rate or failing to compensate this time altogether, port trucking companies must now record and pay employee drivers for time spent on these nonproductive duties if they continue to apply a piece rate compensation system. By guaranteeing at least a minimum wage for all hours worked, AB 1513 ensures minimum compensation for drivers, no matter how unproductive they are in a given day or how long it takes to make a particular delivery.
Furthermore, this bill indirectly blunts alleged employer attempts to retaliate against commercial drivers who refuse certain assignments: in a context where dispatchers allegedly refuse to offer other work to such drivers for significant periods of time or who only offer “bad” dispatches with significant congestion or delay times, drivers who suffer this form of retaliation will be eligible for significant periods of nonproductive time compensation.
With the separation of productive and non-productive hours, port trucking companies that employ drivers will also be required to maintain records that indicate nonproductive hours worked. Unless drivers are allowed to claim their own “nonproductive” hours in their manifests, port trucking companies will have to add new recordkeeping systems to comply with the records requirements of the labor code as they pertain to piece rates.
In all, AB 1513 codifies strict wage and record-keeping requirements that heighten the risk and uncertainty over the use of piece rate compensation schemes.
AB 621 (Hernández)
As amended on September 4, 2015, this bill will add Section 2750.8 to the Labor Code and Section 1160 to the Unemployment Insurance Code, to enact the Motor Carrier Employer Amnesty Program. This program will allow trucking companies to settle with the State Labor Commissioner and Employment Development Department (EDD) to convert all of their commercial drivers to employees and pay all wages, benefits, and taxes owed in exchange for relief from statutory or civil liabilities associated with the misclassification of port drivers as independent contractors. As enacted, the program will take effect on January 1, 2016, and will continue until January 1, 2017.
With hundreds of both decisions and pending claims before the Labor Commissioner and a growing number of claims and audits by the EDD, this bill incentivizes employers to efficiently and equitably resolve both the wage and unemployment disputes brought about by the misclassification of employee commercial drivers as independent contractors.
AB 987 (Levine)
This bill clarifies that requests for reasonable accommodation based on disability or religious affiliation is a “protected activity” subject to retaliation and discrimination provisions in the Fair Housing and Employment Act. Therefore, employee port truck drivers whose licenses are suspended or are otherwise unable to continue as commercial drivers due to a disability, for example, are entitled to reasonable accommodation and are protected from retaliation or discrimination based on their reasonable accommodation requests.
AB 1509 (R. Hernández)
This bill expands employee retaliation and discrimination protections to include employees who are family members of a person who engaged in protected conduct.
AB 1506 (R. Hernández)
This bill provides a period for employers sued under the Private Attorney General Act to “cure” recordkeeping violations by providing the allegedly missing documents such as itemized wage statements to each aggrieved employee for each pay period.
AB 465 (R. Hernández)
Gov. Brown vetoed this prohibition from mandatory arbitration provisions as a condition of employment. Citing concerns that the bill was overbroad and possibly preempted by the Federal Arbitration Act, Gov. Brown requested that a future bill on this subject more pointedly address specific arbitration provisions that violate public policy.
This bill would have had a profound effect on the port trucking litigation. Many companies include arbitration provisions in their agreements with commercial drivers. With hundreds of claims pending at the Labor Commissioner’s office, companies’ petitions to compel arbitration, if filed at the eve of Labor Commissioner hearings, complicate and delay resolution of these claims, even though employment claims do not fall within the scope of many arbitration clauses and therefore cannot be resolved in that forum. Arbitration also can be prohibitively expensive for low-wage workers, including port drivers, discouraging them from filing meritorious claims in the first place.
There is an ongoing legal dispute as to whether arbitration is even valid for port trucking employment disputes. California courts are currently faced with the issue of whether port truck drivers are “transportation” workers operating under “contracts of employment” and therefore explicitly exempt from the Federal Arbitration Act under Section 1. California courts have also issued recent decisions on whether even threshold issues of arbitrability- whether an issue or dispute is even within the scope of an arbitration clause or can be arbitrated- can be resolved in arbitration. Furthermore, in the aftermath of the California Supreme Court’s 2013 decision in Sonic-Calabasas A, Inc. v. Moreno, the courts are still determining under what circumstances arbitration provisions are so unconscionable that they cannot be enforced.
AB 465 would have rendered these issues mootby outright invalidating mandatory arbitration agreements in the employment context. Instead, these issues will continue to flood the courts, with little clarity in the current legal landscape as to whether these arbitration clauses apply to wage claims or not.