By Christopher W. Olmsted
It turns out that your Human Resources Director’s anxiety over possible labor agency audits is not mere paranoia; the government really is out to get you. The California labor agency, the Division of Labor Standards Enforcement (DLSE) released a report revealing that it dramatically increased enforcement actions and assessments in 2012. The trend will likely continue.
Assessments Skyrocketed
The DLSE assessed $25,278,887 for unpaid wages in 2012, a 419% increase over 2010 figures. Overtime wage assessments jumped to $13,324,098 in 2012, a 642% increase over 2010. According to the DLSE’s May 2013 report, these figures represent the highest level of assessments in nearly a decade.
Assessed civil penalties jumped as well, from about $20 million in 2010 to over $51 million in 2012. The DLSE conducted 4,403 inspections in 2012 and imposed penalties in 80% of the time. Although the total number of inspections declined in 2012, the figures reflect a dramatic increase in the percentage of inspections resulting in penalties. Between 2002 and 2011, the percentage varied between 40-60%.
Working Harder
The DLSE’s chief, Labor Commissioner Julie Su, attributes the increase to a better trained and efficient staff that are now targeting employers in a more systematic manner.
The DLSE’s report explains that “rather than merely citing employers for easy-to-uncover violations that only scratch the surface of the underground economy, the DLSE has eliminated the scattershot approach in favor of targeted investigations that are now based on: (a) better intelligence (through data sharing among state agencies and better leads from employer associations, industry groups, and worker advocates); and (b) a commitment to root out illegal schemes aimed at denying workers their wages and avoiding detection.”
Criminal Prosecutions
The Commissioner noted that in 2012 she established a Criminal Investigation Unit comprised of sworn peace officers with the power to conduct criminal investigations, arrest employers for violating the state’s penal code and labor laws, and refer criminal cases to the district attorney’s office. “Since its formation, we have filed 10 felony theft of labor cases seeking over $655,000 in stolen wages,” states Ms. Su in the report.
By “stolen wages,” the Commissioner doesn’t mean managers are mugging their employees in a dark corner of the parking garage. Rather, this mostly means companies who underpaid its workers. The Labor Code includes a number of criminal penalties to employers who fail to pay all earned wages.
A Business Friendly State?
At the same time, the DLSE asserts that it is being fair to employers and helping them comply with the law. Commissioner Su wrote of her efforts in 2012: “As the head of the Division of Labor Standards Enforcement, I embraced the opportunity to promote the health and vitality of our state’s economy by protecting working people and providing a level playing field for honest employers to prosper and thrive.
The DLSE claims that it has created a “business-friendly environment for law abiding employers.” Ms. Su writes: “This Administration’s improved approach to field investigations targets scofflaws and protects those already in compliance from unnecessary inspections. Furthermore, the Division has expanded the use of self-audits of payroll records for employers who want to correct violations. The Administration’s goal is to increase compliance, not to punish those who want to abide by the law, so that honest businesses can thrive and profit in California.
Get Real
Folks, like it or not, the DLSE is just doing its job. You have to do yours. Yes, California’s labor laws are unnecessarily complex, ambiguous, and counter-intuitive. But when the DLSE comes knocking, that’s no excuse. Redouble your efforts to comply with the law, and get professional help (I mean the HR/legal type—although you may need the psychiatric type too after reading this article). The prudent employer may conduct a pre-emptive internal audit in order to avoid becoming another statistic in 2013.
This article is intended as a brief overview of the law and is not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2013 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved. Used with permission.
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cwo@barkerolmsted.com