Job Creator Falls Short in Senate Policy Committee

A California Chamber of Commerce-supported job creator to enable employers to rely on compliance advice from the Labor Commissioner failed to win needed support this week in a Senate policy committee.

SB 524 (Vidak; R-Hanford) aims to reduce litigation and encourage compliance with labor laws by allowing employers to rely in good faith on written advice received from the Labor Commissioner regarding the interpretation of California’s complex labor and employment laws and regulations.

Currently, employers are encouraged to refer to written materials from the Division of Labor Standards Enforcement (DLSE) for “guidance” on wage, hour and working conditions when there is no published, on-point case available. However, employers are provided with no certainty that they will be shielded from liability if they comply in good faith with the DLSE’s written opinions or interpretations.

SB 524 eliminates this problem and provides businesses in California with the security to know that, if they seek out and receive written advice from the DLSE regarding how to comply with the law, they can actually rely upon that information.

Specifically, SB 524 prevents an employer from being financially penalized through the assessment of statutory civil and criminal penalties, fines and interest if the employer relies in good faith on written advice from the DLSE and a court ultimately determines the DLSE’s advice was wrong.

Helps Small Businesses

California has burdensome labor and employment laws that are unique from the rest of the country. Small businesses that lack the financial resources to hire a human resources department or outside counsel to advise them on how to comply with these labor and employment laws have only the DLSE for guidance.

SB 524 helps such small businesses by encouraging them to seek out and rely upon the advice they receive from the DLSE regarding how to comply with the law.

Employees Receive Full Wages

Although SB 524 prevents the assessment of any penalties, fines or interest against an employer who can prove its actions were based upon written guidance from the DLSE, the bill still requires the employer to pay all wages owed to an employee.

In fact, SB 524 requires an employer who has asserted its good faith reliance on the DLSE as a defense to post a bond for the disputed amount of wages, thereby ensuring the employee is made whole.

Bad Actors Not Protected

This bill ensures only the good actor who proactively seeks out advice and conforms to it will be able to avoid penalties, fines and interest.

SB 524 requires the employer to prove that it prospectively sought out the written advice from the DLSE; provided accurate and factual information to the DLSE; conformed conduct to comply with the DLSE’s advice; and no facts or circumstances changed between the time the advice was received to the time of the alleged act or omission.

Notably, since 1947, the federal government has provided employers who rely in good faith upon the advice, opinion letters and guidance of the U.S. Department of Labor regarding the Fair Labor Standards Act with a complete defense against liability.

In the more than 60 years that the federal law, the Portal-to-Portal Act, has been in existence, there have not been any reported abuses of “bad actors” manipulating the system or process in order to gain an unfair advantage.

Uncertainty for California employers regarding the correct application of California’s numerous labor and employment laws has a detrimental impact on the state’s economy as well as employees. Providing certainty through SB 524 will assist all employers in their efforts to comply with the law, thereby producing a better business environment, growth in the economy, and an improved work environment for employees.

Key Vote

Just one member of the Senate Labor and Industrial Relations Committee supported SB 524 on April 26:

Aye: J. Stone (R-Temecula).

Noes: Atkins (D-San Diego), Bradford (D-Gardena).

No vote recorded: Jackson (D-Santa Barbara), Mitchell (D-Los Angeles).

The bill was granted reconsideration.

Staff Contact: Jennifer Barrera