Labor Litigation Law Is Revisited

As the struggle to pass a state spending plan drags on, legislative leaders are trying to negotiate changes to a new labor law that Gov. Arnold Schwarzenegger and business groups have linked to the budget battle.

The governor claims that the law, which the California Chamber of Commerce derisively calls the “sue your boss” statute, has unleashed a torrent of frivolous litigation over alleged labor code violations. At the recent shopping center rally where the governor called Democrats blocking his proposed budget “girlie men,” he also denounced the law as a job killer that “chases businesses way from California.”

The law allows private lawyers to sue employers for labor law violations. Proponents say it addresses a need for increased enforcement of the state’s workplace regulations.

“Wage and hour disputes are serious allegations and, if proven, worthy of penalties being leveled against employers,” said state Sen. Joe Dunn (D-Santa Ana), the law’s author.

A survey of lawsuits filed since the law went into effect in January shows that many of the approximately 50 pending cases involve basic, lunch-bucket issues such as claims for back pay and overtime pay. One Los Angeles attorney has filed about 20 suits seeking back double-time pay for off-duty Los Angeles police officers who provided security on movie, video and commercial shoots.

“This legislation helps level the playing field,” said Alan Harris, a Los Angeles lawyer who has used the law to sue a number of major movie studios and their payroll service contractors. “In Hollywood, we’re dealing with multinational corporations that have limitless assets, and the employees have no one to stand up for them.”

Dunn said he was willing to fine-tune the law but stressed he “won’t even discuss a repeal or a de facto repeal.”

This year, Dunn introduced a follow-up bill to ban suits for “technical violations” such as small print on posters. His bill, which passed the Senate and is currently before the Assembly Appropriations Committee, would authorize judges to reduce or eliminate awards that are arbitrary or unfair.

“I don’t want to clog up the court system,” he said.

Republicans, so far, have rejected Dunn’s second bill. But that steadfast position may be beginning to ease. For the last two days, Dunn and Senate Minority Leader Dick Ackerman (R-Irvine) have been negotiating a possible middle ground that would be “reasonable for business” and still give workers protections for serious labor law violations, Ackerman said.

Schwarzenegger and his allies complain that the law, signed last year by then-Gov. Gray Davis, gives attorneys a license to sue deep-pocket companies for minor infractions of state labor regulations. As evidence, they point to a recent suit seeking six-figure damages from a company accused of using overly small type on posters listing workplace rules.

“It’s ludicrous. The penalties simply don’t fit the infractions,” said Jeanne Cain, senior vice president of the California Chamber of Commerce, which is leading the repeal fight.

Backers of the labor law, mainly labor unions, contend that years of budget cuts have hamstrung the state labor commissioner’s ability to protect workers’ rights. They stress that 75% of civil penalties collected by successful lawsuits would go into state coffers to finance general programs and additional labor enforcement activities.

“Our state does not have the resources to put into labor law enforcement that we used to have,” said Barry Broad, a lobbyist for the International Brotherhood of Teamsters.

Private enforcement may be well-intentioned, but it may not work as planned, said Robert Fellmeth, director of the Center for Public Interest Law at the University of San Diego.

Fellmeth said he was wary of “enlisting plaintiffs’ attorneys ... who have some other motivations” like collecting legal fees.

Dealing with wage and hour cases should be left to state enforcers, not lawyers, said Howard Fabrick, a Los Angeles labor lawyer defending a Burbank-based payroll contractor, Entertainment Partners, against several of Harris’ suits.

Such litigation “has a chilling effect and keeps employers away” from California, Fabrick said.

Dunn’s law is one of two side issues that are holding up approval of the state’s budget, which Schwarzenegger had hoped to sign before July 1, the start of the state’s fiscal year. The other involves a proposed law that would allow more school districts to contract with private bus companies -- a measure some Democrats say would hurt union drivers.