On Thursday, the Assembly Labor and Employment Committee will consider two California Chamber of Commerce-supported bills that could help to reduce employers’ costs and accommodate employees’ needs.
The CalChamber supports AB 281 (Salas; D-Bakersfield) because it reduces costs to business by reforming the Private Attorneys General Act (PAGA) to allow an employer the right to cure a violation before a financially devastating representative action is filed, and if civil litigation is filed, requires the employee seeking penalties on behalf of others to actually have suffered from the alleged violation.
The policy committee will also consider AB 1173 (Harper; R-Huntington Beach) which provides employers with the opportunity to accommodate employees’ needs as well as business demands by allowing employees to request a voluntary, flexible workweek agreement that can be repealed by the employee at any time with proper notice.
AB 281: Labor Code Private Attorneys General Act Reform
California has some of the most onerous and complex labor laws in the country. This complexity is exemplified by PAGA, which essentially allows an individual to pursue a “representative action” on behalf of similarly aggrieved employees against an employer for almost any Labor Code violation. PAGA requires a $100 penalty per employee, per pay period for the first violation, and $200 per employee, per pay period for each subsequent violation.
If there are multiple Labor Code violations, then these penalties are stacked. In addition, if the employee recovers any dollar amount, the employee is entitled to attorney’s fees, which adds another layer of cost onto the employer.
With this statutory scheme, one unintentional and minor violation of the Labor Code can result in the threat of financially devastating civil litigation against an employer, which the plaintiffs’ bar has utilized to leverage quick monetary settlements.
Last year, the Labor and Workforce Development Agency (LWDA) indicated in a budget change proposal that it receives more than 6,000 PAGA notices a year. Although not all of those notices result in an actual civil complaint being filed, a significant portion is leveraged for quick settlements from employers with the threat of costly litigation and/or actual civil litigation if a settlement is not reached.
AB 281 would mitigate this financial threat of frivolous litigation by allowing an employer 65 days in which to cure a limited list of alleged violations before a plaintiff can pursue civil litigation, instead of the 33 days provided for in current law.
The bill is beneficial to both the employer and employee. For the employer, it eliminates the threat of costly civil litigation for an unintentional error of which the employer was not aware. For the employee, AB 281 provides an efficient remedy to an alleged violation.
Notably, AB 281 has an impact only on a PAGA claim. For many Labor Code violations, there still would be an individual private right of action for an employee to pursue for the alleged violation. AB 281 creates a balance between protecting employees and their rights under the Labor Code while also protecting employers from financially devastating litigation over minor alleged violations.
AB 1173: Flexible Workweek
California is one of only three states that requires employers to pay daily overtime after eight hours of work and weekly overtime after 40 hours of work. Even the other two states that impose daily overtime requirements allow the employer and employee to essentially waive the daily eight-hour overtime requirement through a written agreement. California, however, provides no such common-sense alternative.
Rather, California requires employers to navigate through a multi-step process to have employees elect an alternative workweek schedule that, once adopted, must be “regularly” scheduled. This process is filled with potential traps for costly litigation, as one misstep may render the entire alternative workweek schedule invalid and leave the employer on the hook for claims of unpaid overtime wages.
Currently, there are 33,037 reported alternative workweek schedules with the Division of Labor Standards Enforcement. According to the Employment Development Department’s calculations for the fourth quarter of 2016, there are approximately 1,498,017 employers in California. At best, approximately 2.3% of California employers are utilizing the alternative workweek schedule option. More realistically, however, given that the information in the database is according to work unit instead of employer, it is likely that less than 1% of employers in California are utilizing this process.
AB 1173 would relieve retail industry employers of the administrative cost and burden of adopting an alternative workweek schedule by providing a small carve-out during the holiday season (November to January). Pursuant to AB 1173, at the request of the employee, an employer would be able to implement a flexible work schedule that allows the employee to work up to 10 hours in a day or 40 hours in a week during the holiday season, without the payment of overtime.
Employers should be able to provide their employees more flexibility and negotiate through a written agreement, revocable by either party, the daily/weekly schedule that satisfies the needs of both the employee(s) and the employer.
AB 281 is scheduled for a second policy committee hearing on January 17 in Assembly Judiciary.
Staff Contact: Laura Curtis