RED ALERT!!!
The New "Bounty
Hunter" Legislation: What Everyone Should Know
In
October of this year, former Governor Gray Davis signed into law one of the
most far-reaching pieces of legislation affecting employers in California. The
Labor Code Private Attorney General's Act of 2004 (SB 796 Dunn; D-Garden
Grove; Labor Code § 2699) creates a new private right of
action for employees and their attorneys to enforce virtually any provision
of the California Labor Code. Not only is a new private right of action
created, but the bill, which becomes effective January 1, 2004, provides
lucrative financial incentives for employees to file suit and invites the
filing of class action lawsuits.
Since
California's Labor Code contains most of
the laws governing employment in California,
this new right of action should alarm employers. All employers in the state
should take immediate preventative measures to reduce the likelihood of
such lawsuits.
Overview of the New Legislation
Under
existing law, the Division of Labor Standards Enforcement, not the courts,
enforces most Labor Code violations. Most, if not all, penalty provisions
in the Labor Code cannot be enforced by employees in civil actions in
court. The new legislation would allow aggrieved employees to bring civil
actions for Labor Code violations. (Labor Code § 2699 (f).)
The Labor Code covers wage and hour obligations, employee classification
issues, drug and alcohol rehabilitation requirements, vacations, meal and
rest periods, laws governing layoffs, occupational safe and healthy,
employee absences, workers' compensation and a host of other employment
related matters.
The
"aggrieved employee" may bring the civil action on behalf of
himself or herself and other current or former
employees against whom alleged violations were committed. An
"aggrieved employee" is defined as "any person who was
employed by the alleged violator and against whom one or more of the
alleged violations was committed." (Labor Code § 2699(c).)
The
new right of action is in addition to any other pre-existing remedies
available under state or federal law. An employee has the right to pursue
other remedies either separately or concurrently with an action taken under
this section.
No
action may be brought by an aggrieved employee if the Labor and Workforce
Development Agency or any of its departments, divisions, commissions,
boards or agencies cites a person for a violation of the Labor Code based
on the same facts and theories and initiates proceedings to collect
applicable penalties. (Labor Code § 2699(g).)
However, if, for instance, Cal/OSHA chooses not to cite an employer for a
safety violation, an employee could now sue.
The
legislation does not affect the exclusive remedy provisions of the workers'
compensation laws. (Labor Code § 2699(j).)
Any
employee who prevails in an action brought under this statute is entitled
to an award of attorneys' fees and costs. (Labor Code § 2699 (f).)
The
legislation does not set forth any defenses. However, normal defenses to
claims of alleged violations of the particular Labor Code section at issue
should apply.
Penalties
The
bill sets forth a penalty structure for circumstances where no existing
penalty is provided by the particular provision of the Labor Code at issue:
*
If, at the time of the alleged violation, the person does not employ one or
more employees, the civil penalty is $500.
*
If, at the time of the alleged violation, the person employs one or more
employees, the civil penalty is $100 for each aggrieved employee per pay
period for the initial violation and $200 for each aggrieved employee per
pay period for each subsequent violation.
For
example, an employer with 200 employees who forgot to put up a required
wage and hour poster could be subject to a $100 penalty for each of its 200
employees for the first pay period, for a total of $20,000 in penalties. If
the violation persisted for the remaining 25 pay periods, the employer is
potentially liable for an additional $1 million in penalties.
The
law encourages class action lawsuits by allowing an employee to recover the
civil penalty on behalf of others. As an added incentive to class-action
suits, the law provides that an employee who prevails in any action is
entitled to attorney's fees and costs.
The
fear among many employers is that the legislation encourages employees,
unions, and activist groups to actively look for any minor violation in
order to bring a class-action lawsuit.
Distribution of Penalties: Boon to the State
A
thought provoking aspect of this new legislation is the amount of money the
state receives if a penalty is recovered. While this legislation was
thought by many to be a payback to trial lawyers who financially supported
former Governor Davis, the legislation also seemingly provides needed
revenue to the state.
The
civil penalties recoverable are distributed as follows:
* 50%
to the State's General Fund;
* 25%
to the Department of Labor and Workforce Development for programs aimed at
the education of employers and employees about their rights and
responsibilities under this code; and
*
Only 25% to the aggrieved employee.
*
If the employer does not employ more than one employee, 50% goes to the
General Fund and 50% to the Labor and Workforce Development Agency.
Yet,
the plaintiff's attorney who brings the suit is allowed to keep 100% of his
or her fees. Conversely, even if an employer prevails in court and the
lawsuit is found to be meritless, the bill does
not provide for employers to recover attorneys' fees or costs.
The
Legislature, in its findings, stated that this new law was needed to
provide "[a]dequate financing of essential
labor law enforcement functions ... to achieve maximum compliance with
state labor laws in the underground economy...." (SB 79.) The
Legislature stated that decreased staffing levels in the state labor law
enforcement agencies in part prompted the legislation. In effect, the
legislation amounts to a de facto tax against employers. The Legislature
further states that "the only meaningful deterrent to unlawful conduct
is the vigorous assessment and collection of civil penalties as provided in
the Labor Code."
Employers Must Be Advised To Take Preventative Measures
Employers
often call attorneys for advice and counsel regarding labor and employment
laws. The laws can be difficult and may be subject to interpretation. Now
if a single mistake is made, no matter how minor or inadvertent, an
employer can be sued. The employee does not need to show that he
suffered any actual harm or damage.
Given
this new legislation, employers must be urged to immediately review and
audit their labor and employment polices and practices to ensure complete
compliance with the California Labor Code. Practices that may have been
previously viewed as minor, such as posting signs or providing required
information on a pay stub, should be reviewed for compliance. Managers
should be trained and educated about the myriad of Labor Code rules.
For further information or developments,
please contact us, or better yet, sign up for our training class entitled,
"Employment Law Update" at UC Davis, Extension, Galleria, 2901 K
Street, Sacramento, CA, on Friday, February 6, 2003, from 8:30-noon. The
cost is $195.
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