Background

The California Labor Code is the set of laws that defines the employer-employee relationship as well as their respective responsibilities to ensure fair, safe, and healthy work arrangements. For the most part, the labor code provides important protections for employees by requiring, among other things, transparent record keeping by employers, workers compensation insurance, strict overtime pay rules, and protections against child exploitation. The Sustainable Economies Law Center (SELC) believes that these protections are necessary for many employees working for businesses in our current economic system and supports fair and consistent enforcement of these laws.

Yet, there are cases where application of the law results in unjust outcomes for employers. For example, the Labor Code applies a mandatory fine for incomplete wage statements, whether the mistake is intentional or not. As we realized during our representation of the Morgan Hill farmers, the mandatory nature of the fine resulted in unconstitutionally excessive fines for unintentional mistakes that threatened the farmers' ability to operate their businesses. The impact fell particularly on low-income farmers (who handle their own paperwork because they can't afford to hire payroll services) and immigrant farmers (some of whom have limited English capabilities). We believe that the Labor Commissioner should have the discretion to consider whether the employer's actions are the result of inadvertent non-compliance or whether the employer is a bad actor, whether the actions negatively impacted the worker in a substantial way, and tailor the penalty accordingly.

We also realized that the DLSE website offers very little information for small businesses regarding basic compliance with the Labor Code. This is especially true for business owners who do not speak or understand English well. Rural communities are especially vulnerable to being out of compliance because they lack access to legal resources.

Proposals for Change

SELC is proposing two solutions, and we have outlined these in a letter to the DLSE. First, we think DLSE can do a better job of informing small employers of their compliance responsibilities, particularly with wage statements and time records. Employers often purchase form wage statements and time records from office supply stores, and these forms are insufficient to comply with the Labor Code. This is unfair for employers who have made a good faith effort to comply with the law. In response to this problem, SELC has created a Wage Statement and Time Record Guide that explains and illustrates legally compliant wage statements and time records. We will send these documents to DLSE, requesting that they display them prominently on their websites as well as include them in any materials used during employer training and workshops.

Second, we think that Labor Code section 226.3 needs to be amended to prevent unconstitutionally excessive fines, like the ones originally placed on the Morgan Hill Farmers. To address this issue, SELC has drafted a legal memorandum that explains this issue and suggests amendments to section 226.3.