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SB-1368 Contractors: wages: liability.(2019-2020)

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Date Published: 03/25/2020 09:00 PM
SB1368:v98#DOCUMENT

Amended  IN  Senate  March 25, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1368


Introduced by Senator Durazo

February 21, 2020


An act to amend Section 98.6 Sections 218.7 and 226.2 of the Labor Code, relating to employment.


LEGISLATIVE COUNSEL'S DIGEST


SB 1368, as amended, Durazo. Protected employee conduct. Contractors: wages: liability.
Existing law requires, for all contracts entered into on or after January 1, 2018, a direct contractor, as defined, making or taking a contract in the state for the erection, construction, alteration, or repair of a building, structure, or other work, to assume, and be liable for, specified debt owed to a wage claimant that is incurred by a subcontractor, at any tier, acting under, by, or for the direct contractor for the wage claimant’s performance of labor included in the subject of the original contract. Existing law authorizes the Labor Commissioner to bring an action under specified statutes or in a civil action to enforce this liability, and authorizes a third party owed fringe or other benefits, or a joint labor-management cooperation committee, as defined, to bring a civil action to enforce the liability against a direct contractor under these provisions, as specified. Existing law provides that the obligations and remedies under these provisions are in addition to any obligations and remedies otherwise provided by law, except that the provisions are not to be construed to impose liability on a direct contractor for anything other than unpaid wages and fringe or other benefit payments or contributions, including interest owed.
This bill would, for specified contracts, extend a direct contractor’s liability under these provisions to also include penalties and liquidated damages. The bill would also make the direct contractor liable for the failure to obtain valid workers’ compensation coverage. The bill would authorize the Employment Development Department to obtain against a direct contractor, any relief it could obtain against any subcontractor at any tier for the failure of that subcontractor to report and pay all required employer contributions, including the failure to report and pay all required employer contributions, worker contributions, and personal income tax withholding as required by the Unemployment Insurance Code.
Existing law requires employers to provide itemized statements to employees at the time wages are paid that show, among other things, gross wages earned and total hours worked. Existing law requires the itemized statements for employees who are compensated on a piece-rate basis to state separately the total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period, among other things. Existing law requires those employees to be compensated for rest and recovery periods and other nonproductive time at or above specified minimum hourly rates, separately from any piece-rate compensation.
This bill would exempt any work performed pursuant to a contract for construction from these piece-rate provisions.

Existing law prohibits a person from discharging an employee or in any manner discriminating, retaliating, or taking any adverse action against any employee or applicant for employment because the employee or applicant engaged in protected conduct, as specified. Existing law makes it a misdemeanor for an employer to willfully refuse to hire, promote, or otherwise restore an employee or former employee who has been determined to be eligible for rehiring or promotion by a grievance procedure, arbitration, or hearing authorized by law. Existing law also prohibits a person from retaliating against an employee because the employee is a family member of a person who has, or is perceived to have, engaged in specified protected conduct.

This bill would make nonsubstantive changes to these provisions.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 218.7 of the Labor Code is amended to read:

218.7.
 (a) (1) For contracts entered into on or after January 1, 2018, a direct contractor making or taking a contract in the state for the erection, construction, alteration, or repair of a building, structure, or other private work, shall assume, and is liable for, any debt owed to a wage claimant or third party on the wage claimant’s behalf, incurred by a subcontractor at any tier acting under, by, or for the direct contractor for the wage claimant’s performance of labor included in the subject of the contract between the direct contractor and the owner.
(2) The For contracts entered into on or after January 1, 2018, and before January 1, 2021, the direct contractor’s liability under this section shall extend only to any unpaid wage, fringe or other benefit payment or contribution, including interest owed but shall not extend to penalties or liquidated damages.
(3) A direct contractor or any other person shall not evade, or commit any act that negates, the requirements of this section. This section does not prohibit a direct contractor or subcontractor at any tier from establishing by contract or enforcing any otherwise lawful remedies against a subcontractor it hires for liability created by the nonpayment of wages, fringe or other benefit payments, or contributions by that subcontractor or by a subcontractor at any tier working under that subcontractor.
(b) (1) The Labor Commissioner may enforce against a direct contractor the liability for unpaid wages created by subdivision (a) listed in subdivision (a) that includes unpaid wages pursuant to Section 98 or 1197.1, or through a civil action. The direct contractor’s liability shall be limited to unpaid wages, including any interest owed. 1197.1. In addition to this relief, the Labor Commissioner, in contracts entered into on or after January 1, 2021, may, in a civil action, enforce against the direct contractor any relief it could obtain against any subcontractor at any tier for the failure of any such contractor to obtain valid worker’s compensation coverage as required by law, including Section 3700.
(2) A third party owed fringe or other benefit payments or contributions on a wage claimant’s behalf may bring a civil action against a direct contractor to enforce the liability created by subdivision (a). In addition to this relief, any third party may, for contracts entered into after January 1, 2021, bring a civil action against a direct contractor for penalties, liquidated damages, and interest for fringe or other benefit payments or contributions owed by any subcontractor at any tier. The court shall award a prevailing plaintiff in such an action its reasonable attorney’s fees and costs, including expert witness fees.
(3) A joint labor-management cooperation committee established pursuant to the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Sec. 175a) may bring an action in any court of competent jurisdiction against a direct contractor or subcontractor at any tier for unpaid wages owed to a wage claimant by the direct contractor or subcontractor for the performance of private work, including unpaid wages owed by the direct contractor, pursuant to subdivision (a). (a). In addition to this relief, a joint labor management cooperation committee may, for contracts entered into on or after January 1, 2021, seek penalties, liquidated damages, and interest against a direct contractor. The court shall award a prevailing plaintiff in such an action its reasonable attorney’s fees and costs, including expert witness fees. Prior to commencement of an action against a direct contractor to enforce the liability created by subdivision (a), the committee shall provide the direct contractor and subcontractor that employed the wage claimant with at least 30 days’ notice by first-class mail. The notice need only describe the general nature of the claim and shall not limit the liability of the direct contractor or preclude subsequent amendments of an action to encompass additional wage claimants employed by the subcontractor.
(4) The Employment Development Department may enforce against a direct contractor, for contracts entered into on or after January 1, 2021, any relief it could obtain against any subcontractor at any tier for the failure of that subcontractor to report and pay all required employer contributions and personal income tax withholding as required by the Unemployment Insurance Code.

(4)

(5) No other party may bring an action against a direct contractor to enforce the liability created by subdivision (a). this section.
(c) Unless otherwise provided by law, property of the direct contractor may be attached, after trial, for the payment of any judgment received pursuant to this section.
(d) An action brought pursuant to this section shall be filed within one year of the earliest of the following:
(1) Recordation of the notice of completion of the direct contract, pursuant to Section 8182 of the Civil Code.
(2) Recordation of a notice of cessation of the work covered by the direct contract, pursuant to Section 8188 of the Civil Code.
(3) Actual completion of the work covered by the direct contract.
(e) This section does not apply to work performed by an employee of the state, a special district, a city, a county, a city and county, or any political subdivision of the state.
(f) (1) Upon request by a direct contractor to a subcontractor, the subcontractor and any lower tier subcontractors under contract to the subcontractor shall provide payroll records, which, at a minimum, contain the information set forth in subdivision (a) of Section 226, and which are payroll records as contemplated by Section 1174, of its employees who are providing labor on a private work, which payroll records shall be marked or obliterated only to prevent disclosure of an individual’s full social security number, but shall provide the last four digits of the social security number. The payroll records must contain information sufficient to apprise the requesting party of the subcontractor’s payment status in making fringe or other benefit payments or contributions to a third party on the employee’s behalf.
(2) Upon request of a direct contractor to a subcontractor, the subcontractor and any lower tier subcontractors under contract to the subcontractor shall provide the direct contractor award information that includes the project name, name and address of the subcontractor, contractor with whom the subcontractor is under contract, anticipated start date, duration, and estimated journeymen and apprentice hours, and contact information for its subcontractors on the project.
(3) A subcontractor’s failure to comply with this subdivision shall not relieve a direct contractor from any of the obligations contained in this section.
(g) For purposes of this section, “direct contractor” and “subcontractor” have the same meanings as provided in Sections 8018 and 8046, respectively, of the Civil Code.
(h) Nothing in this section shall alter the owner’s obligation to timely pay a direct contractor as set forth in Sections 8800 and 8812 of the Civil Code, or a direct contractor’s obligation to timely pay a subcontractor as set forth in Section 7108.5 of the Business and Professions Code and Section 8814 of the Civil Code, or the penalties for failing to do so as set forth in Sections 8800 and 8818 of the Civil Code and Section 7108.5 of the Business and Professions Code, except that the direct contractor may withhold as “disputed” all sums owed if a subcontractor does not timely provide the information requested under paragraphs (1) and (2) of subdivision (f), until that information is provided.
(i) For any contract entered into on or after January 1, 2019, in order to withhold payments as disputed pursuant to subdivision (h), the direct contractor must specify, in its contract with the subcontractor, the specific documents and information that the direct contractor will require that the subcontractor provide under paragraphs (1) and (2) of subdivision (f). Subcontractors may include the same requirements in their contracts with lower tiered subcontractors and may withhold as disputed all sums owed if a lower tiered subcontractor does not provide the information requested under paragraphs (1) and (2) of subdivision (f), until that information is provided.
(j) The provisions of this section are severable. If any provision of this section or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 2.

 Section 226.2 of the Labor Code, as added by Section 5 of Chapter 754 of the Statutes of 2015, is amended to read:

226.2.
 This section shall apply for employees who are compensated on a piece-rate basis for any work performed during a pay period. This section shall not be construed to limit or alter minimum wage or overtime compensation requirements, or the obligation to compensate employees for all hours worked under any other statute or local ordinance. For the purposes of this section, “applicable minimum wage” means the highest of the federal, state, or local minimum wage that is applicable to the employment, and “other nonproductive time” means time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.
(a) For employees compensated on a piece-rate basis during a pay period, the following shall apply for that pay period:
(1) Employees shall be compensated for rest and recovery periods and other nonproductive time separate from any piece-rate compensation.
(2) The itemized statement required by subdivision (a) of Section 226 shall, in addition to the other items specified in that subdivision, separately state the following, to which the provisions of Section 226 shall also be applicable:
(A) The total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period.
(B) Except for employers paying compensation for other nonproductive time in accordance with paragraph (7), the total hours of other nonproductive time, as determined under paragraph (5), the rate of compensation, and the gross wages paid for that time during the pay period.
(3) (A)  Employees shall be compensated for rest and recovery periods at a regular hourly rate that is no less than the higher of:
(i) An average hourly rate determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods.
(ii) The applicable minimum wage.
(B) For employers who pay on a semimonthly basis, employees shall be compensated at least at the applicable minimum wage rate for the rest and recovery periods together with other wages for the payroll period during which the rest and recovery periods occurred. Any additional compensation required for those employees pursuant to clause (i) of subparagraph (A) is payable no later than the payday for the next regular payroll period.
(4) Employees shall be compensated for other nonproductive time at an hourly rate that is no less than the applicable minimum wage.
(5) The amount of other nonproductive time may be determined either through actual records or the employer’s reasonable estimates, whether for a group of employees or for a particular employee, of other nonproductive time worked during the pay period.
(6) An employer who is found to have made a good faith error in determining the total or estimated amount of other nonproductive time worked during the pay period shall remain liable for the payment of compensation for all hours worked in other nonproductive time, but shall not be liable for statutory civil penalties, including, but not limited to, penalties under Section 226.3, or liquidated damages based solely on that error, provided that both of the following are true:
(A) The employer has provided the wage statement information required by subparagraph (B) of paragraph (2) and paid the compensation due for the amount of other nonproductive time determined by the employer in accordance with the requirements of paragraphs (4) and (5).
(B) The total compensation paid for any day in the pay period is no less than what is due under the applicable minimum wage and any required overtime compensation.
(7)  An employer who, in addition to paying any piece-rate compensation, pays an hourly rate of at least the applicable minimum wage for all hours worked, shall be deemed in compliance with paragraph (4).
(b) Compensation on a piece-rate basis shall not be permitted for work performed under a contract for construction.

(b)

(c) This section shall become operative on January 1, 2021.

SECTION 1.Section 98.6 of the Labor Code is amended to read:
98.6.

(a)A person shall not discharge an employee or in any manner discriminate, retaliate, or take any adverse action against any employee or applicant for employment because the employee or applicant engaged in any conduct delineated in this chapter, including the conduct described in subdivision (k) of Section 96, and Chapter 5 (commencing with Section 1101) of Part 3 of Division 2, or because the employee or applicant for employment has filed a bona fide complaint or claim or instituted or caused to be instituted any proceeding under or relating to their rights that are under the jurisdiction of the Labor Commissioner, made a written or oral complaint that they are owed unpaid wages, or because the employee has initiated any action or notice pursuant to Section 2699, or has testified or is about to testify in a proceeding pursuant to that section, or because of the exercise by the employee or applicant for employment on their behalf, or on behalf of others, of any rights afforded them.

(b)(1)Any employee who is discharged, threatened with discharge, demoted, suspended, retaliated against, subjected to an adverse action, or in any other manner discriminated against in the terms and conditions of their employment because the employee engaged in any conduct delineated in this chapter, including the conduct described in subdivision (k) of Section 96, and Chapter 5 (commencing with Section 1101) of Part 3 of Division 2, or because the employee has made a bona fide complaint or claim to the division pursuant to this part, or because the employee has initiated any action or notice pursuant to Section 2699 shall be entitled to reinstatement and reimbursement for lost wages and work benefits caused by those acts of the employer.

(2)Any employer who willfully refuses to hire, promote, or otherwise restore an employee or former employee who has been determined to be eligible for rehiring or promotion by a grievance procedure, arbitration, or hearing authorized by law, is guilty of a misdemeanor.

(3)In addition to other remedies available, an employer who violates this section is liable for a civil penalty not exceeding ten thousand dollars ($10,000) per employee for each violation of this section, to be awarded to the employee or employees who suffered the violation.

(c)(1)Any applicant for employment who is refused employment, who is not selected for a training program leading to employment, or who in any other manner is discriminated against in the terms and conditions of any offer of employment because the applicant engaged in any conduct delineated in this chapter, including the conduct described in subdivision (k) of Section 96, and Chapter 5 (commencing with Section 1101) of Part 3 of Division 2, or because the applicant has made a bona fide complaint or claim to the division pursuant to this part, or because the employee has initiated any action or notice pursuant to Section 2699 shall be entitled to employment and reimbursement for lost wages and work benefits caused by the acts of the prospective employer.

(2)This subdivision shall not be construed to invalidate any collective bargaining agreement that requires an applicant for a position that is subject to the collective bargaining agreement to sign a contract that protects either or both of the following as specified in subparagraphs (A) and (B), nor shall this subdivision be construed to invalidate any employer requirement of an applicant for a position that is not subject to a collective bargaining agreement to sign an employment contract that protects either or both of the following:

(A)Any employer against any conduct that is actually in direct conflict with the essential enterprise-related interests of the employer and where breach of that contract would actually constitute a material and substantial disruption of the employer’s operation.

(B)A firefighter against any disease that is presumed to arise in the course and scope of employment, by limiting their consumption of tobacco products on and off the job.

(d)The provisions of this section creating new actions or remedies that are effective on January 1, 2002, to employees or applicants for employment do not apply to any state or local law enforcement agency, any religious association or corporation specified in subdivision (d) of Section 12926 of the Government Code, except as provided in Section 12926.2 of the Government Code, or any person described in Section 1070 of the Evidence Code.

(e)Any employer, or any person acting on behalf of the employer, shall not retaliate against an employee because the employee is a family member of a person who has, or is perceived to have, engaged in any conduct delineated in this chapter.

(f)For purposes of this section, “employer” or “any person acting on behalf of the employer” includes, but is not limited to, a client employer as defined in paragraph (1) of subdivision (a) of Section 2810.3 and an employer listed in subdivision (b) of Section 6400.

(g)Subdivisions (e) and (f) shall not apply to claims arising under subdivision (k) of Section 96 unless the lawful conduct occurring during nonwork hours away from the employer’s premises involves the exercise of employee rights otherwise covered under subdivision (a).