Job Creator Bill Reduces Litigation

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The California Chamber of Commerce has identified a job creator bill that reduces litigation and encourages compliance with labor laws.

SB 524 (Vidak; R-Hanford) prevents any employer who relies in good faith upon the written advice of the Division of Labor Standards Enforcement (DLSE) regarding how to comply with the law from being punished through the assessment of civil and criminal penalties, fines and interest.

The DLSE is a state agency that is charged with enforcing the wage, hour and working condition labor laws. As part of its effort to fulfill this responsibility, the DLSE issues opinion letters on various wage, hour and working condition topics, as well as an enforcement manual that sets forth the DLSE’s interpretation and position on these issues. Currently, employers are encouraged to refer to the DLSE’s written materials for “guidance” on these topics 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 actually can 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.

Ensures 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 received 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.

Does Not Protect Bad Actors

SB 524 requires the employer to prove that:

• it prospectively sought out the written advice from the DLSE;

• it provided accurate and factual information to the DLSE;

• it conformed its conduct to comply with the advice of the DLSE; and

• no facts or circumstances changed between the time the advice was received to the time of the alleged act or omission.

A bad actor that is operating in the underground economy is not going to voluntarily seek out advice from the regulatory agency from which it is trying to hide. Moreover, a bad actor will not be able to satisfy any of these safeguards in SB 524. 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.

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

Creates Certainty for Employers

When the Portal-to-Portal Act was enacted, Congress set forth in its findings and declarations that “uncertainty on the part of industry,” as well as “the difficulties in the sound and orderly conduct of business and industry,” could have a negative impact on commerce. Accordingly, Congress included an affirmative defense for employers who rely upon the interpretations and opinions of the Wage and Hour Division of the U.S. Department of Labor.

Similarly, 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.

Action Needed

SB 524 has been assigned to the Senate Labor and Industrial Relations Committee.

The CalChamber is asking members to contact their senator and members of the committee to urge them to support SB 524 as a job creator.

An easy-to-edit sample letter is available at www.calchambervotes.com.

Staff Contact: Jennifer Barrera

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Jennifer Barrera
About Jennifer Barrera
Jennifer Barrera, senior policy advocate, works with the executive vice president in developing policy strategy and represents the CalChamber on labor and employment, taxation and legal reform issues. Before joining the CalChamber in September 2010, she worked at a statewide law firm that specializes in labor/employment defense. She also advised small and large businesses on compliance issues, presented seminars on employment-related topics, and authored articles in human resources publications. Barrera earned a B.A. in English from California State University, Bakersfield, and a J.D. with high honors from California Western School of Law.