Bill would allow liens for unpaid wage claims

Bill would allow liens for unpaid wage claims


mark stoneCalifornia labor law soon could become even more problematic for business.

Assembly Bill 2416 is by Assemblyman Mark Stone, D-Monterey Bay. It would allow employees with unpaid-wage claims to file liens on the property of business owners. Stone said it would thwart “wage theft” by employers and recover hundreds of millions of dollars for abused employees.

Business groups warn the bill would create a “dangerous and unfair precedent in the wage and hour arena.”

AB2416 already passed the Assembly, 43-27. It’s scheduled for consideration by the Senate Appropriations Committee on Thursday.

Chamber warns of employer harassment

The California Chamber of Commerce argued in an Aug. 8 press release the bill “would allow employees to harass employers by filing prejudgment unproven wage liens on their property.”

The bill does provide penalties for frivolous, malicious liens, according to the committee’s legislative analysis. An employee acting “in bad faith” by refusing to release a lien could receive a $1,000 fine and have to pay the employer’s attorney fees and court costs.

Employers can ask the California Labor Commissioner to remove the lien if the employee doesn’t respond in 30 days to the employer’s request to release it. In response to critics, the bill was amended to exempt an employer’s principal residence from a lien.

But the Chamber warned:

“AB2416 would cripple California businesses by allowing any employee, governmental agency, or anyone ‘authorized by the employee to act on the employee’s behalf’ to record liens on an employer’s real property or property where an employee ‘performed work’ for an alleged, yet unproven, wage claim.

“At the time of recording the lien, the employee would have no burden to provide any actual evidence that the employer violated any wage and hour law. There is no question that improper liens will be recorded on the employer’s or third party’s property.”

The Chamber is also concerned that AB2416:

  • Allows a wage lien on property where an employee worked, potentially making third parties liable.
  • Allows an employee’s creditor the right to record a lien.
  • Does not remove the risk that a homeowner will have to pursue legal action to have an improper lien removed.
  • Precludes financing options for property, interfering with commercial investments, lending and personal home loans.
  • Forces property owners into the state’s underfunded, over-booked court system to petition for removal of the lien before being able to fully utilize their property.​​

​The Chamber argues there are already sufficient protections in place for workers, including the ability to file an unpaid wage claim with the labor commissioner and to appeal that decision in civil court.

Jackson: Wage theft a serious problem

Senate Judiciary Committee Chairwoman Hannah-Beth Jackson, D-Santa Barbara, speaking at the committee’s June 17 hearing, said something needs to change.

“There is clearly, and I don’t think we have any dispute, we have a serious problem with people who are getting cheated out of their hard-earned money,” she said. “So the question becomes: How do we address that problem in a way that is fair to them?

“A lot of these folks are Spanish-speaking people who are working in minimum wage jobs who are working their tails off and getting stiffed on their wages. There’s $300 million of unpaid hard-earned wages [taken] from people.”

Chamber policy advocate Jennifer Barrera responded that the solution is to expand the powers and increase the budget for the Labor Commissioner’s Office in the Department of Industrial Relations.

“We agree there is a problem and would like to remedy it as much as anyone else,” she said. “Wage theft impacts good actors in the employment community who are trying to do it right and comply with the law.

“What we have proposed and have been trying to do, through either legislation or support for the recent wage-theft campaign that the labor commissioner has launched, is to support the labor commissioner in increasing the labor commissioner’s authority to deal with this issue.”

The commissioner should review a claim to determine whether it has merit before a lien is filed, she said. He also should determine the amount of the claim rather than leaving that to the employee.

“We believe increasing the labor commissioner’s authority is the way we should be going, not necessarily giving this authority to every employee,” said Barrera.

Increasing labor commissioner power would be expensive

But the increase in funding needed to provide that authority would be astronomical, according to Matthew Sirolly, an attorney at the Wage Justice Center who said he’s litigated dozens of lien cases.

“The reality is that as it stands, hearings take a year or two for the labor commissioner to have their resources to actually hold a hearing,” he said.

“So if we were to follow statutory timelines requiring these things to happen in a couple months, let alone some sort of expedited pre-decision to determine whether a lien is valid, it seems the inquiry and resources would have to be on the magnitude of 100-fold. We’re not talking of something that’s realistic.”

The business community is prepared to increase the fees it pays to the labor commissioner’s office if it results in increased power for that office, said Barrera.

“What I’m suggesting is, maybe not this year but next year if this were in place, there would have to be an adjustment of the employer assessments in order to account for the resources necessary to enforce the proposal that I’ve set forth to have the labor commissioner do this as part of the process that already exists for hearings before the labor commissioner’s office,” she said.

Stone joined Sirolly in dismissing that possibility.

“We do require statements made under penalty of perjury, so that we can assure that there’s some legitimacy to the claim,” said Stone. “The issue with the labor commissioner is … we would have to significantly increase the amount of money going to the labor commissioner so they can hire the staff and do that job. I’m not sure that’s realistic in this form.

“This is a form that would not cost the state or anybody else additional administrative fees to put into place, because it’s a self-enforcing mechanism.”

Analyst: ‘Potentially significant court costs’

There actually will be some costs to the state budget and potentially big impacts on the state court system if the bill passes, according to the legislative analysis. The labor commissioner’s office would incur first-year costs of nearly $9 million, with ongoing annual costs around $8 million. The Secretary of State’s office estimates increased costs of $100,000 annually.

The analysis also warns of “unknown, potentially significant court costs associated with additional proceedings regarding wage claims.”

Stone argued those costs are nothing compared to the costs that unpaid workers are facing.

“Government works best when we provide balance,” he said. “The system is completely out of balance. That’s to the detriment of the lowest paid worker. They have rights but absolutely no remedy. If we … have employees without any remedy, what else are they going to be doing, how else are they going to get their issues met, unless there’s something of value against which to attach the claim?”

‘Chilling impact’ on California real estate market

The bill’s costs could also take a toll on the statewide real estate industry, warned Craig Page, executive vice president for the California Land Title Association.

“We think it’s going to have a profound chilling impact on the real state economy of California, both in a residential context and a commercial context,” he said. “I think what will happen is the dragnet of unintended consequences will pull a lot of innocent homeowners into this as well as commercial property owners.”

What is now a fairly straightforward process for a title company to search county records would be complicated by also having to search court records to discover whether a wage lien action is underway and whether the property affected is a principal residence.

“It’s going to take the escrow process that now is a 30-to-45 day process on average and extend it perhaps months if not years as we try to interact with the courts and the labor commissioner to determine how real property transactions will happen,” warned Page.

“We have by definition many wage lien holders who are unsophisticated and not familiar with the recording process who are going to record these. And they are going to be recorded against homeowners in districts throughout California by accident.

“Once the damage is done you have to undo that either through quiet title action, or you’re going to have to go through the courts to get those liens removed. It’s not an easy process to do. Consumers are going to be adversely impacted by this.”

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