AB1234 - Employment: nonpayment of wages: complaints.

Amended IN Senate July 17, 2025 Amended IN Senate June 18, 2025 Amended IN Assembly May 23, 2025 Amended IN Assembly April 23, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 1234 Introduced by Assembly Member Ortega (Coauthors: Assembly Members Garcia and Kalra) (Coauthor: Senator Pérez) February 21, 2025 An act to amend Sections 98, 98.1, and 98.2 of the Labor Code, relating to employment. LEGISLATIVE COUNSEL'S DIGEST AB 1234, as amended, Ortega. Employment: nonpayment of wages: complaints. Existing law authorizes the Labor Commissioner to investigate employee complaints and to provide for a hearing in any action to recover wages, penalties, and other demands for compensation. Existing law requires the Labor Commissioner to determine all matters arising under the commissioner’s jurisdiction. Existing law makes any employer or other person acting on behalf of an employer who violates or causes to be violated specified provisions regulating hours and days of work in any order of the Industrial Welfare Commission to be subject to a civil penalty, as specified. This bill would revise and recast the provisions relating to the process for the Labor Commissioner to investigate, hold a hearing, and make determinations relating to an employee’s complaint. The bill would set forth timelines for the Labor Commissioner to notify parties of an employee complaint, as provided, and for the defendant to respond, as provided. The bill would require the Labor Commissioner, if the Labor Commissioner determines to prosecute the action or that no action will be taken, to notify the parties within 30 days of receipt of the defendant’s answer. If the Labor Commissioner does not make either of those determinations, the bill would require the Labor Commissioner, within 90 days of receipt of the defendant’s answer, to conduct an investigation of the employee complaint, make an estimated appraisal of the amount of wages, damages, penalties, expenses, and other compensation owed, and to determine all the parties liable for the assessment. The bill would set forth a process for the Labor Commissioner’s investigation, assessment, and determination, including authorizing the Labor Commissioner to issue a subpoena for records and requiring the Labor Commissioner to issue a formal complaint. This bill would require the Labor Commissioner, within 90 days of the issuance of the formal complaint, to set a hearing date and would set forth procedures for the hearing. The bill would require the Labor Commissioner, within 15 days of the hearing, or upon a failure of the defendant to answer or appear, to file in the office of the Division of Labor Standards Enforcement a copy of the order, decision, or award. This bill would require authorize the Labor Commissioner, in an order, decision, or award granted by the Labor Commissioner pursuant to specified provisions to impose an administrative fee payable in the amount of up to 30% of the order, decision, or award. award, as provided. The bill would require the administrative fee to be deposited into the Wage Recovery Fund, which would be created by the bill. The bill would require the money in the fund, upon appropriation, to be disbursed by the Labor Commissioner only to persons determined by the Labor Commissioner to have been damaged by the failure to pay wages and penalties and for other damages by an employer. The bill would require a disbursement to be made pursuant to a claim for recovery from the fund in accordance with procedures prescribed by the Labor Commissioner and would require any disbursed funds subsequently recovered by the Labor Commissioner from a liable party, as provided, to be returned to the fund. The bill would require the Labor Commissioner to waive any or all of the administrative fee upon request by a defendant, if specified conditions are met. This bill would classify an appeal filed in a superior court relating to the Labor Commissioner’s order, decision, or award as an unlimited civil case. The bill would grant a court hearing the action jurisdiction over the entire wage dispute, including related wage claims not raised in front of the Labor Commissioner, but would prohibit the court from consolidating the action with any other actions not arising out of, or related to, the underlying order, decision, or award, absent an executed agreement in writing by all parties. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 98 of the Labor Code is amended to read: 98. (a) (1) (A) The Labor Commissioner is authorized to investigate employee complaints. The Labor Commissioner may provide for a hearing in any action to recover wages, penalties, and other demands for compensation, including liquidated damages if the employee complaint alleges payment of a wage less than the minimum wage fixed by an order of the Industrial Welfare Commission or by statute, properly before the division or the Labor Commissioner, including orders of the Industrial Welfare Commission, and shall determine all matters arising under the Labor Commissioner’s jurisdiction. (B) The Labor Commissioner may also provide for a hearing to recover civil penalties due pursuant to Section 558 against any employer or other person acting on behalf of an employer, including, but not limited to, an individual liable pursuant to Section 558.1. (C) It is within the jurisdiction of the Labor Commissioner to accept and determine claims from holders of payroll checks or payroll drafts returned unpaid because of insufficient funds, if, after a diligent search, the holder is unable to return the dishonored check or draft to the payee and recover the sums paid out. (D) For the purpose of calculating the statute of limitations for any employee complaint investigated under this section, the action shall commence upon the filing of the employee complaint. (2) If the Labor Commissioner determines that no further action will be taken on the employee complaint, the Labor Commissioner shall, within 30 days of the receipt of an employee complaint, notify the complainant of the determination. If the Labor Commissioner declines to continue to investigate an employee complaint, the claimant may pursue remedies through any alternative forum available with the tolling of the statute of limitations based on the date the employee complaint was made, so long as the subsequent action is commenced within one year of the date the notice was provided pursuant to this subdivision. (3) If the Labor Commissioner does not make a determination pursuant to paragraph (2) that no further action will be taken, the Labor Commissioner shall, within 60 days of receipt of an employee complaint, notify all parties against which the employee complaint has been filed of the allegations asserted in the complaint, including the total amount of wages, penalties, and other demands for compensation alleged due. If the employee complaint did not include the complainant’s best estimate of wages and penalties owed, the Labor Commissioner may calculate a monetary value based on the complainant’s allegations and any investigation it has conducted within the time period allowed. The notice shall identify the Labor Code section under which the claimant asserts the defendant’s liability if it is ascertainable from the employee’s complaint or if it is ascertainable from other available information within the time period allowed. (4) Within 30 days of transmittal of the notice described in paragraph (3), the defendants shall respond by either paying the full amount due as described in the notice or by filing an answer with the Labor Commissioner. An answer shall, at a minimum, include both of the following: (A) Whether the defendant admits to employing the complainant during any period alleged in the notice. (i) If the defendant denies an employment relationship based on a worker’s classification as an independent contractor, the defendant shall provide facts to demonstrate that the classification meets the requirements in Article 1.5 (commencing with Section 2775) of Chapter 2 of Division 3. (ii) If the defendant denies an employment relationship for a reason other than as specified in clause (i), the defendant shall name any and all known employers of the complainant or other parties potentially liable for the violations during the claim period, and shall include their contact information. (B) Whether the defendant admits or denies owing any amount to the complainant. (i) For any admission of an amount owed, the Labor Commissioner may issue an order, decision, or award for that amount as set forth in Section 98.1. The order, decision, or award may be appealed under Section 98.2. The Labor Commissioner may continue to investigate any claims for which the defendant did not admit to owing. (ii) For any denial of liability for wages, penalties, and other demands for compensation alleged, the defendants shall set forth the particulars in which the employee complaint is inaccurate or incomplete and the facts upon which the defendant intends to rely. (5) If the defendant fails to provide an answer within 30 days of transmittal of the notice described in paragraph (3), the Labor Commissioner shall issue an order, decision, or award in the amount stated in the notice, as set forth in Section 98.1. The order, decision, or award may be appealed under Section 98.2. If the defendant provides an answer, but the answer does not meet the requirements of this section, the Labor Commissioner may provide the defendant with 15 additional days to submit a revised answer. After the 15 days, if the defendant fails to provide an answer within the requirements of this section, the Labor Commissioner shall issue an order, decision, or award in the amount stated in the notice described in paragraph (3), as set forth in Section 98.1. The order, decision, or award may be appealed under Section 98.2. (6) The Labor Commissioner may request an answer from any new party added to the employee complaint at any point in the investigation by issuing a notice of claim to that employer within 60 days of the employer being added to the employee complaint. The notice of claim shall include the information specified in paragraph (3). The employer’s response to the notice of claim shall be governed by paragraphs (4) and (5). (b) If the Labor Commissioner determines to take action in accordance with Section 98.3 or determines that no further action will be taken on the employee complaint, the Labor Commissioner shall, within 30 days of the receipt of the answer, notify all parties of the determination. If the Labor Commissioner declines to continue to investigate an employee complaint, the claimant may pursue remedies through any alternative forum available with the tolling of the statute of limitations based on the date the employee complaint was made, so long as the subsequent action is commenced within one year of the date the notice was provided pursuant to this subdivision. (c) If the Labor Commissioner does not make a determination pursuant to subdivision (b), the Labor Commissioner shall conduct an investigation of the employee complaint. The Labor Commissioner shall make an estimated appraisal of the amount of wages, damages, penalties, expenses, and other compensation owed and shall determine all the parties liable for the assessment. The investigation, assessment, and determination of liability shall be made within 90 days of the receipt of the answer described in paragraph (4) of subdivision (a), and shall be made through the following process: (1) The Labor Commissioner may decide to hold a mandatory investigatory and settlement conference upon providing notice of the conference to the parties. If the claimant fails to attend the conference, the employee complaint may be dismissed unless a claimant can provide a good cause reason for their nonappearance. If the defendant fails to attend the settlement conference and does not provide a good cause reason for their nonappearance, the Labor Commissioner may issue an order, decision, or award in the amount stated in the notice provided by paragraph (3) of subdivision (a). The order, decision, or award shall be issued as set forth in Section 98.1 and may be appealed under Section 98.2. Upon agreement of the claimant, the Labor Commissioner may hold additional mandatory investigatory and settlement conferences if additional defendants are identified during the investigation of the employee complaint. (2) The Labor Commissioner may issue a subpoena pursuant to Section 92 to a defendant requesting copies of records for the employee, as described in Section 226, during the claim period. The Labor Commissioner may also issue a subpoena pursuant to Section 92 for all records required to be maintained by the relevant wage order, and to any other parties or for any other information as determined by the Labor Commissioner. (3) The Labor Commissioner shall issue a formal complaint that includes the allegations in the employee complaint concerning the time period of the claim, the laws violated, and all parties liable, and the amount of compensation requested, applicable interest, and administrative fees available under Section 98.1. (d) Within 90 days of the issuance of the formal complaint described in paragraph (3) of subdivision (c), the Labor Commissioner shall set a hearing date and serve a copy of the formal complaint on all parties, along with a notice of the date, time, and place of the hearing. The Labor Commissioner may conduct the hearing in person, over the telephone, or via video conference. (1) Within 10 days after service of the notice of the hearing and the formal complaint, a defendant may file an answer or a revised answer with the Labor Commissioner in any form as the Labor Commissioner may prescribe, setting forth the particulars in which the formal complaint is inaccurate or incomplete and the facts upon which the defendant intends to rely. (2) No pleading other than the formal complaint and answer of the defendant or defendants shall be required. Both shall be in writing and shall conform to the form and the rules of practice and procedure adopted by the Labor Commissioner. (3) Evidence on matters not pleaded in the answer or produced in response to a subpoena issued by the Labor Commissioner shall be allowed only on terms and conditions the Labor Commissioner shall impose. In all these cases, the claimant shall be entitled to a continuance for purposes of review of the new evidence. (4) If a defendant fails to appear, the Labor Commissioner may issue an order, decision, or award in the amount stated in the formal complaint issued pursuant to paragraph (3) of subdivision (c). The order, decision, or award shall be issued as set forth in Section 98.1, and may be appealed under Section 98.2. (5) If a defendant [Text truncated for display. Full text available on Congress.gov.]