**JOB KILLER**
FLOOR ALERT
AB 1164 (LOWENTHAL)
LIENS: EMPLOYEES AND WORKERS
January 24, 2014
TO: Assemblymembers: Nazarian, Wilks, Bocanegra, Dababneh, Gatto
FROM: INSERT YOUR COMPANY NAME HERE
SUBJECT: AB 1164 (LOWENTHAL) LIENS: EMPLOYEES AND WORKERS
OPPOSE – JOB KILLER
We OPPOSE AB 1164 (Lowenthal), as amended on January 23, 2014, as it would cripple California businesses by allowing any employee, employee representative or the Labor Commissioner to file wage liens on an employer's real property, personal property or any property where an employee "bestowed labor" for unproven wage claims.
AB 1164 allows an employee to side-step the judicial process and assert a wage lien on an employer's real or personal property, or even a third party's real or personal property, before any trial or administrative hearing has been held to determine if any wages are actually owed by the employer.
California has some of the most onerous wage and hour laws in the country. Litigation is constantly filed for wage-related disputes, such as whether an employee has been properly classified as exempt versus non-exempt, as an independent contractor versus an employee, or even paid at the appropriate rate for the proper amount of time.
Despite the undeniable complexity of wage and hour laws in this state, AB 1164 would allow any employee, employee representative, or the Labor Commissioner to file a lien against the employer's real or personal property, or a third party's real or personal property, simply on the basis that the employee believes he or she has a valid wage claim against the employer. At the time of filing the lien, the employee would have no burden to provide any actual evidence that the employer violated any wage and hour law. Rather, all the employee would have to do is simply provide: (1) a demand statement of the alleged amount owed; (2) employer's name; (3) description of the property and if the employer is no longer the owner of the property; and (4) the employee's address.
Under AB 1164, this lien could be applied for single employee wage claims that amount to several hundred dollars in damages and/or class action and representative wage claims that allege millions of dollars in damages. Employees should not be allowed to interfere with an employer's business or property, or someone else’s real property where work was performed, through filing a lien of such significance without first proving the merit of their allegations. To allow otherwise will basically subject employers and third parties to constant extortion in order to avoid dealing with a lien on their property.
Not Just Limited to Minimum Wage Violations:
AB 1164 allows a lien to be filed for a broad scope of all unpaid wages, “other compensation,” and related penalties, not just minimum wage violations. The list of potential penalties under the Labor Code for which an employee could file a lien under AB 1164 is equally as broad, whereas the type and number of different liens that may be filed under AB 1164 are overwhelming.
Non-Employer Third Parties Held Liable for Unpaid Wages:
AB 1164 allows an employee to file a wage lien on any "property upon which the employee bestowed labor for the benefit of the property owner and with the owner's consent and knowledge that such labor was being provided." This directly allows an employee who performs work in an off-site location to file a wage lien against a third party. Under this bill, a cable installer could file a wage lien against every home in which he installed cable because: (1) the cable was installed for the benefit of the property owner; (2) the owner agreed to have the cable installed; and (3) the homeowner knew the cable was being installed. Despite the fact that the third party homeowner had absolutely no control over the employee's work or the wages he/she was paid, that homeowner could have his/her property leveraged for unpaid wages of the company's employees. It is patently unfair to hold an innocent third party liable for the alleged, unproven acts of another.
Because the bill allows an employee to file a lien pre-judgment, there is no impartial tribunal to determine whether the lien has been filed in accordance with these proposed parameters. The only person making that determination under AB 1164 is the employee, who will suffer absolutely no repercussions if he/she identifies the wrong property upon which to file the lien.
Violates Due Process:
AB 1164 violates due process. AB 1164 does not provide a preliminary notice to any property owner before the filing of the lien. AB 1164 does not provide any remedy to avoid or dismiss a lien by a property owner, other than posting a bond, which the court in Lambert held was insufficient to satisfy due process requirements. Accordingly, the lack of procedural safeguards is a violation of due process.
No Effective Statute of Limitations on Timing to File Lien:
Under AB 1164, it states that the employee must file the lien within 180 days after ceasing work for the employer. However, the statement that the employee must file with the county recorder's office or the Secretary of State noticeably does not require the employee to identify his/her last date of work. Accordingly, the lien can be effectively filed at any time and the employer or third-party property owner would be forced to challenge the validity of the lien through a civil action.
No Limit on the Number of Liens Filed:
Under AB 1164, there is no limit as to the number of liens an employee may file against a property owner. The only limitation is that the lien be filed within 180 days after ceasing work with the employer. During this time period, an employee can assert whatever number of liens he/she wants without consequence, thereby constantly subjecting the property owner to endless civil litigation.
Filed Against All Property:
AB 1164 states that a lien shall not be filed against a principal residence or property bought for the services furnished primarily for personal, family, or household purposes. However, because this is a pre-judgment lien, there is no objective decision maker who will determine at the time of the lien whether
the property set forth in the statement submitted by the employee identifies a principal residence or household products. Rather, this determination will be made solely by the employee based upon their good faith belief. Accordingly, there is essentially no limit on the type of property that may have a lien filed against it under AB 1164.
Applies to Exempt Employees:
AB 1164 states that a lien shall not be filed by an employee who qualifies as an exempt employee under the administrative, executive, or professional exemption as set forth in Industrial Welfare Commission Wage Orders. Notably, an employee may also be exempt under the outside sales exemption or commission salesperson exemption, yet those employees would be able to file a valid lien under AB 1164.
More importantly, given that the liens under AB 1164 can be filed before a judgment is issued there is no objective party to determine whether the employee filing the lien is exempt or non-exempt. Neither the clerk at the County Recorder's office nor the Secretary of State is going to question or issue a determination as to whether the employee is eligible to file a lien on the requested property based upon his/her exempt versus non-exempt status. Rather, the employer or third party property owner will have to pay the attorney's fees and costs associated with proving the employee was ineligible to file the lien as an affirmative defense.
Freeze Future Financing Options:
AB 1164 will negatively impair an employer’s ability to seek future financing that is secured against the real property. This will preclude an employer from being able to refinance their mortgage or secure a home equity line of credit, even in the event of an emergency. The employer will not be able to expand or hire new employees due to the inability to secure financing to do so. In short, no lender is going to extend a loan to someone that has multiple liens on their real or personal property.
Will Increase Neighborhood Blight:
AB 1164 extends a lien established under the bill to any “subsequent bona fide purchaser of the property subject to the employee’s lien.” This provision will discourage investors from buying abandoned or foreclosed property because the liability that gave rise to the lien would have to be satisfied. An unwitting qualified investor may very well purchase a home only to later determine that a lien has been recorded against the property.
Employee First in Time Wins:
AB 1164 also incentivizes employees to file their lien on an employer or third party’s property first and enforce the lien, before any subsequent employee liens can be filed. AB 1164 is silent as to what happens if only one employee files a lien and forecloses on property, thereby leaving no assets or property for remaining wage claims of other employees who may not yet have filed a lien. This inequity is why such issues are better handled by a judge or other objective decision maker who can allocate assets fairly to ensure all potential parties affected are adequately compensated.
Protections Already Exist in Law:
There are already sufficient protections in place for the failure to pay wages, including the following: (1) an employee may file a claim with the Labor Commissioner’s office; (2) an employee may file a civil
claim, with the right to obtain attorney’s fees and costs; (3) the Labor Commissioner can require an employer who has been convicted of any provision of the Labor Code to file a bond in an amount deemed sufficient by the Labor Commissioner; (4) the Labor Commissioner can require the employer to
provide a list of all bank accounts, personal property, real property, automobiles, or other assets; and (5) a court can order a judgment lien or a bank levy on an employer’s property.
In fact, just last year the Governor signed into law AB 1386, which allows the Labor Commissioner to file a lien on an employer’s property within the state after a final order has been issued. This law has only been in place for a month and there is insufficient time to determine whether this increased authority of the Labor Commissioner will effectively resolve some of the alleged acts of bad actor employers. AB 1164 would essentially undue the increased authority of the Labor Commissioner that was just provided at the beginning of this year.
Not the Same As Other Existing Liens:
As set forth above, AB 1164 does not have the due process protections in place like a mechanic’s lien does. AB 1164 is also not similar to other existing liens such as those for harvested crops, lumber, or livestock or mining. (Civil Code sections 3059-3066). Specifically, these other liens are more narrowly tailored than AB 1164 as follows: (1) such liens are limited in amounts to either the contract price, reasonable value of the property upon which work was performed, or a set maximum of two weeks pay as opposed to AB 1164 which allows an employee to assert whatever amount he/she deems appropriate; (3) such liens can only be asserted against the property upon which work was performed, as opposed to AB 1164 which allows an employee to file a lien against an employer’s real or personal property anywhere in the state; and (3) such liens are more restricted in when they must be filed from within 10 days after work has ceased to up to 90 days, as opposed to the liens under AB 1164 which do not have to be filed until 180 days after the employee ceases working for the employer.
For these reasons we are OPPOSED to AB 1164 as a JOB KILLER and urge you NAY vote when it comes before you for consideration.
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