Senate to Vote on CalChamber-Opposed Employment-Related Bills

Two California Chamber of Commerce-opposed bills that increase employer costs and threaten employers with civil litigation and criminal prosecution are awaiting action on the Senate Floor when the Legislature returns from summer recess.

  • AB 970 (Nazarian; D-Sherman Oaks) significantly expands the Labor Commissioner’s authority and increases employer costs by permitting the Labor Commissioner to enforce local minimum wage laws through the citation process, which will increase annual assessments to fund the Labor Commissioner’s office for all employers across the state, including those in areas with no local minimum wage.
  • AB 1017 (Campos; D-San Jose) threatens employers with civil litigation for seeking an applicant’s prior salary and benefit information even though the applicant suffered no harm in compensation.

AB 970: Expansion of Labor Commissioner Authority

AB 970 seeks to allow the Labor Commissioner to issue citations to employers for failure to comply with local minimum wage laws that will increase employer annual assessments and provide employers with a limited opportunity to appeal.

Increased Annual Assessments on Employers

Until 2009, some of the operations of the Department of Industrial Relations (DIR), including the Division of Labor Standards Enforcement (DLSE), were funded through the General Fund, special funds, penalties, and federal funding. In 2009, the General Fund portion of the funding for these divisions was primarily transferred to private sector employers through annual assessments on workers’ compensation premiums, which are based upon the employers’ payroll.

Accordingly, any increase in the Labor Commissioner’s jurisdiction will likely result in an increase to all employers’ annual assessments. Given that AB 970 expands the Labor Commissioner’s authority to issue citations for local minimum wage mandates, the bill will ultimately increase the DLSE’s costs, which will likely be passed onto employers through higher annual assessments. Employers statewide should not have to pay for these increased assessments for the enforcement of local laws where they are not located.

Limited Right to Appeal

Under Labor Code Section 1197.1, an employer challenging a citation can request an administrative hearing to contest the citation and may challenge the administrative ruling only pursuant to a writ of mandate. A writ of mandate limits the superior court’s scope of review of the evidence and arguments the court may consider for purposes of challenging the administrative ruling. Comparatively, in a “Berman Hearing” through the Labor Commissioner’s office, an employer has a right to a new trial in superior court if the employer wants to challenge an administrative ruling, which provides the court with unlimited review of the underlying complaint as well as any new issues, evidence or arguments raised on appeal.

Accordingly, to the extent the Labor Commissioner is resolving any local minimum wage violations through the Berman Hearing process, that process provides a fairer opportunity for an employer to appeal a ruling it believes was issued in error rather than the citation process.

AB 1017: Frivolous Litigation

AB 1017 limits an employer’s inquiry into relevant information and exposes employers to additional litigation, despite the lack of any actual harm to the job applicant.

AB 1017 precludes an employer from asking or requesting an applicant to disclose his or her prior salary or compensation, under the claim that employers will base any offer of compensation solely on the employee’s prior salary. Despite this claim, there are several legitimate, nondiscriminatory reasons employers seek information about an applicant’s prior compensation. Employers do not necessarily have accurate wage information on what the current market is for all potential job positions. In competitive industries, business competitors can utilize it to lure talented employees from their workforce.

By requesting salary information, employers can adjust any unrealistic expectations or salary ranges to match the current market rate for the advertised job position. This has worked to the benefit of the applicant/employee. Additionally, it can be utilized as a reference regarding whether the employee’s expectations of compensation far exceed what the employer can realistically offer. Requiring both the applicant and employer to waste time on the interview process which, for highly compensated employees, could be lengthy, to then ultimately learn at the end of the process that the employee would never consider taking the compensation offered is unnecessary.

Moreover, the actual concern with regard to wage disparity should be what the final compensation is that the applicant is offered/paid compared to those in the same job category. Labor Code Section 1197.5 requires an employer to provide equal pay for equal work, which Senator Jackson is seeking to strengthen through SB 358. Similarly, the federal Equal Pay Act also precludes employers from paying  employees different wages for the same job based upon gender. The Fair Employment and Housing Act (FEHA) and Title VII preclude an employer from discriminating against an employee, including wages, on the basis of gender. Accordingly, there are existing protections to preclude an employer from paying a female employee less, even if the employee’s prior salary was lower than that of her male counterpart.

An employer should not be subject to litigation under the Labor Code Private Attorneys General Act (PAGA) Sections 2699, et seq., simply for inquiring into an applicant’s salary history or prior compensation when there is no ultimate harm to the applicant/employee. Notably, a PAGA claim can be filed by an employee for any violation of the Labor Code, regardless of whether the employee suffered harm, with statutory penalties ranging from $100-$500 per employee, per pay period, with attorney’s fees.

This threat of litigation is totally unnecessary given that an employer’s inquiry into an applicant’s salary/compensation history has no harm; or, to the extent it does, is already adequately covered by existing law with regard to gender discrimination.

Action Needed

AB 970 and AB 1017 await action by the Senate when the Legislature returns from summer recess.

The CalChamber is asking members to contact their senators and urge that they oppose AB 970 and AB 1017.

Staff Contact: Jennifer Barrera