Adventures in Labor Code Violations

Disclaimer: I do not practice labor or employment law.  The following post is a reaction to my limited experience dealing with the California Department of Industrial Relations.

We are supposedly a capitalist country.  That would suggest that we are very business friendly, from large corporations to mom-and-pop operations.  We are also proud of our heritage as a country built, in large part, by the labor of immigrants.  That would suggest that immigrants who come here to start businesses should be sitting pretty, right? Maybe for some, but certainly not for all.

In California, we have very detailed and comprehensive laws that govern how you may conduct business in this state.  These laws may be found in several collections of laws (or “statutes”), called codes.  We have a Business and Professions Code.  We have a Civil Code.  For criminal laws, we have the Penal Code.  For families, we have the–you guessed it–Family Code.  Anyway, the one I want to focus on here is the Labor Code.  The California Labor Code is a set of statutes that govern a business’s labor practices.  That is, how to hire people, how to fire people, work environment conditions, how to pay employees, etc.  I will be focusing on how an employer pays its employees.  These practices are often lumped together as “wage and hour” laws.  These laws include time for breaks, how many hours an employee can work without overtime, how often an employee must be paid, and what type of information must be included with an employee’s pay check.  It’s a very complicated area of law.  So, who exactly enforces the Labor Code?  I mean, how can the State of California keep tabs on EVERY business’s wage and hour practices?

I present to you the State of California, Department of Industrial Relations, Division of Labor Standards Enforcement (DLSE).  It’s a bureaucratic agency that enforces all of the Labor Code violations in the state.  They are kind of like how the police enforce Penal and Traffic Code violations, except there’s no day in court.

Read that last part again.  There’s no day in court.  Well, not that kind of court, with a judge in a black robe.  Here’s how it works:

1. Inspection.  DLSE sends out “inspectors” to randomly check for Labor Code violations.  These are plain-clothes officials that drop in on businesses unannounced to inspect them for violations.  This is where the process starts to get dicey.  I’ll visit this issue in more detail below.

2. Citation. If DLSE sees any violations, they will either warn the business, or cite it right there.  Think of a traffic or parking ticket.  It almost looks identical.  It will specify the violation, the date, and the amount of the penalty (almost all penalties will be a fine of some sort).

3. Appeal (optional).  That’s right, there’s no where you go to actually determine whether you violated the Labor Code or not.  The inspector decides in his/her mighty discretion whether there’s a violation, and it’s now up to YOU to disprove it.  If your time to appeal lapses, then you’re out of luck.  Pay up.  More on this later, too.

That’s the whole process above.  It’s like getting a parking ticket that usually runs a few thousand dollars.  Here’s the rub: it’s a perfectly good process if a couple of assumptions are true.  If all of the following are true, DLSE inspections should be A-OK: (a) you speak pretty good English; (b) you have either personally read the Labor Code (and understood it) or have enough resources so that someone else read it and explained the appropriate provisions to you; and (c) you have the wherewithal, time, and knowledge to seek out resources to help your business comply with the law and flourish.  Again, those are easy if you are a native English speaker, a sophisticated businessman, or you are just blessed with lots of resources.  But it’s not the reality for many in our immigrant populations.  Let me give you two real world examples that I personally encountered.

Example 1: Car Wash Business

I live in an industrial zone of Belmont.  My next door neighbor is a car detailing and washing business.  It’s pretty much a one-man show, with the addition of some family members and contract workers he brings on when times are busy.  It’s literally a garage with a driveway; one car is worked on at a time.  The owner is from El Salvador, and immigrated here several years ago.  His English isn’t great.  He has a wife and a couple of kids, and lives close by in San Mateo.

One day he comes to me and tells me that DLSE has been visiting him several times and that he just doesn’t understand what they want from him.  He thought they wanted him to verify that he carries worker’s compensation insurance.  I take a look at his documents, and he had already been cited for $10,000 a few years back.  And this current citation is for $8,500.  Both citations are for the same offense–failure to register a car wash business.  I looked up the law, and lo and behold, if you operate a car wash business in California, you must register with the state annually.  Part of the registration is, of course, a registration fee, and the requirement that you carry a $15,000 bond to insure against any unpaid wages.  You see, Los Angeles County was facing a problem with car washes employing undocumented workers and not paying them overtime.  So, in response, the legislature, in their infinite wisdom, decided to require all car washes statewide to register their business if they had any employees.  My neighbor wasn’t aware of this requirement, and never registered with the state.   He worked out a payment plan with DLSE and was paying off his first citation (the $10,000).  It could have been a larger penalty, but the law caps the cite at $10,000.  (How nice of them).  It was too late for me to help him with the old citation, so I got working on the $8,500 one.  It turns out that our great state would rather cite this man $18,500, collectively, and harass him about it than to help him comply with a law that is supposed to safeguard all of us from abusive employers.  Ah, the irony.  Not once did the state show him any information in Spanish (because, you know, no one espeakita Spanish here) or send someone out who spoke Spanish.  Boy, imagine trying to find someone in California that speaks Spanish!  So, I wrote a letter to the DLSE accusing them of abusive tactics that bully the little, foreign guy running the car wash.  What do you know? They “administratively dismissed” the $8,500 citation! Well played, Golden State.

Example 2: Local Restaurant

A local Iranian restaurant in Redwood City is owned by a very nice family who immigrated here from Iran a few years ago.  The husband and wife own and operate the restaurant, and their 20-something year old son attends community college and helps out part time.  Their English is not great, either.  (Noticing a trend?)

They were visited by the DLSE right before their dinner rush, unannounced.  Because there’s nothing like making sure our businesses thrive like randomly harassing business owners right before the busiest part of their day.  This family pays their bills on time, pays their taxes, and even hires an accountant to deal with their payroll.  The restaurant employs 3 or so part time servers.  When the inspector showed up, he angrily demanded that the owners show him a pay stub from their pay checks.  Confused and hurried, the owners had no clue what he wanted, but admitted that they provide pay stubs but not identical to the one the inspector showed them as an example.  So, they were cited… for $7,000, under Labor Code § 226.3.  A violation amounts to $250 per employee per pay period.  So, you can see that it adds up.  Based on on-the-spot questioning of the owners, questioning of the employees, and some gumshoe detective work, the esteemed inspector felt it necessary to fine this business.  Because the employees were not getting paid the public was being harmed they weren’t paying their taxes employers were not following the letter of the law.

If you read § 226.3 (I’ll do it for you) it reads, in pertinent part:

In enforcing this section, the Labor Commissioner shall take into consideration whether the violation was inadvertent, and in his or her discretion, may decide not to penalize an employer for a first violation when that violation was due to a clerical error or inadvertent mistake. (Emphasis added).

So these inspectors are armed with the ability to randomly inspect any business, and the discretion to decide whom to cite and whom to let slide.  Well, that’s convenient.  This was the restaurant owners’ one and only violation and/or citation.  They would be eligible for the discretionary warning instead of a citation.  Because any time you can penalize someone for a good faith mistake instead of educating them on how to comply with the law, you gotta do it, amIright?

The restaurant owners appealed the citation. Remember, that’s the only recourse you have.  The DLSE sets a hearing date.  I was personally present at the hearing, and attempted to represent the restaurant owners.  I wasn’t involved throughout the inspection, and I had only heard of the facts and very quickly researched the law a couple days before the hearing.  But, I figured having me there–if for nothing else besides my English skills–is better than nothing.

Allow me to describe what a DLSE appeals “hearing” is like.  The proceeding is conducted in one of many DLSE offices.  This particular one was in downtown Oakland, in the State of California building.  You enter into a lobby where there is a person sitting at a window.  You fill out your appearance slip and wait to be called.  The hearing officer steps out of the hearing room into the lobby and calls us in.  The hearing officer could not have been older than 30.  (In fact, if you look up his CalBar page, he was licensed 8 months ago!).  We enter into a very small room with a boardroom table jutting out from a desk.  The hearing officer is seated at the desk, the restaurant owners and me on one side of the boardroom table, the DLSE inspector on the other side of the table.  The proceeding is tape recorded on a handheld recording device that sits atop a mug.  The DLSE inspector has an opportunity to present his side, I get an opportunity to ask him questions, the restaurant owners present their side, and the inspector asks the business owners questions.  Picture a very abbreviated witness examination, except without the direct examination questions.

The DLSE inspector reads a written account of his encounter with the restaurant owner.  It sounds exactly how you would imagine: like a wanna-be cop describing his take-down of some drug cartel fugitives.  He brings in exhibits to submit to the hearing officer.  As he hands me copies, I whisper to the restaurant owner whether he has seen these documents.  The hearing officer chides me for speaking out of turn, since it is the DLSE’s turn to present their side.  I explained that I needed to confer with my client off the record so I can appropriately cross examine the DLSE.  The hearing officer explained to me that EVERYTHING is on the record and I may not speak to my client.  (WTF?? What’s the point of having an attorney present if the attorney cannot confer with his/her client?) So, I explain that I either need to whisper off the record or I need to step outside and speak with them.  The hearing officer says that I cannot do either, then tells me that if I need to speak with them I need to request that we go outside to speak with them. I’m scratching my head at this point and realize that we are definitely not going to get a fair shake in this proceeding.

After a break outside, we return and I begin questioning the DLSE agent.  The hearing officer is continually interrupting me to just “get to the facts”.  I’m pretty sure this isn’t how it was taught to him in civil procedure, but he’s the hearing officer and I’m not.  The whole process is a farce.  Imagine you get a parking ticket for $7,000 that you feel you shouldn’t have to pay because you didn’t even think you were parking your car.  Now you’re contesting the ticket and the judge is telling your attorney to just get on with it, rolling his eyes.

When we get to the restaurant owner’s time to present their position, I had no exhibits, and the restaurant owners even conveniently left out some details.  But that’s on them.  I don’t blame the DLSE for the restaurant owners’ lack of preparation, or that they weren’t being completely forthcoming with me.  And I was only there pro bono to lend a hand.  I did my best with the information I had and I did point out that the law provides for a discretionary warning without a citation and that the DLSE opted to go for the full citation like a bunch of ruthless bullies.  I also highlighted the irony that these laws are in place so that employees are paid appropriately and that this citation effectively puts the employer out of business, which will most definitely interrupt the employees from getting paid.

I received the findings and order today.  The $7,000 citation was upheld.  All of it.  This citation effectively more-than-doubles the restaurant owners’ rent for a given month.  It is crippling.  It’s being done to protect us Californians from abusive employers.  But it’s merely an abusive Labor Commissioner, and an out-of-touch legislature.  This would never happen to someone with means or someone who isn’t confused or scared by DLSE random visits.  This is all a shake down, and it’s targeted toward business owners who are shaken by such tactics.

So what’s the take away from all of this? I’m not waving the “our state is racist flag”.  Really, I’m not.  I am calling for compassion.  If someone is trying their hardest to comply with the rules, and in every other way is in compliance and acting in good faith, then we owe it to that person–as a fellow member of our great community–to show them their shortcomings and allow them to fix it.  We should be going after repeat offenders.  To willful offenders.  That’s why we allow for discretion.  Discretion allows for compassion.  Sure, it can also mean favorites.  But, I for one, would rather have business owners afforded second chances than to penalize them out of business.  DLSE, from my experience, is an agency that bullies businesses.  This type of behavior of ruthless citations directly impacts those news reports about jobs, about businesses moving out of California, about people not being able to feed their family.  It’s being done in our name as Californians.  This is not good business, and it’s not good government.

Here is a .pdf of the DLSE Findings and Order.

Where There’s a Will, There’s a Say

We’re all going to die. I don’t mean that in a Chicken Little sort of way. I mean that in a stating-the-obvious sort of way. The jury is still out as to what happens to us after we die, but one thing that is fairly certain is that once you die you have little say over what happens to your property, to whom you give your property, and any other instructions you’d like to make from “beyond the grave.” Of course, you can have a say if you properly draft and execute a will.

Wills are cheap and easy to create. I even saw a commercial on TV where a famous lawyer advertised will drafting services online for less than $100. Even still, there are few people out there who have a will. Statistics vary, but one study shows that 55% of adult Americans do not have will.

If that’s the case, it seems like it’s not that big of a deal to die without a will, right?

Not exactly. When someone dies without a will, the person is said to have died intestate. For those keeping score at home, that means “without a will.” When you die intestate, your property (which becomes your estate’s property, since you’re dead and all) is distributed using your state’s intestacy statute. Well, we all know what intestate means, but what exactly does statute mean? A statute is a law created by the legislature, or law-making body of the government (think, Congress). So somewhere in the California Code (Probate Code sections 6400, et seq. to be exact) there is a statute (remember, that just means “law”) that says where a person’s property goes if he or she dies intestate. Well, that then suggests that if you don’t have a will when you die, then the legislature decides who gets your property.

Who cares? I don’t even own anything!

The cool thing about a will is that it doesn’t “speak” until you die. So it can dispose of property that you don’t even own yet. You don’t have anything now, but what if you start accumulating property? Or what if you are later the beneficiary of someone else’s estate? Or you marry someone else who has some property? Just as importantly, you can “cut” people out of any share of your estate if you so decide.

Let me use an example to illustrate an extreme circumstance where a will would certainly clarify any ambiguity. Hypothetically, let’s assume Harry is in a relationship with Wendy. Harry and Wendy have a child, Cheryl. Unfortunately, Harry and Wendy start having problems and decide to split up. They were never married. Harry moves on, and although he remains a loving father to Cheryl, he decides to marry his new girlfriend Greta. Greta has two children from her previous marriage. As tragedy would have it, Harry chokes on a pretzel and dies. Harry never got around to drafting a will. Under California’s intestacy statute, all of Harry’s community property and one-half of his separate property go to his surviving spouse, Greta. When Greta dies, all of her property (including the property she acquired from Harry’s estate) is now disposed of through her will, or if there is no will, by the intestacy statute. In other words, unless Greta provides for Cheryl through her own will, Cheryl will have to somehow intervene in order to assert her rights, if any, to take some of her father’s property. However, if Harry had a will providing for Cheryl, then disaster could be averted… or, at least Harry’s true wishes would be clear.

So, what’s the point? I still don’t have any more property than when this post began.

The point is that peoples’ living situations are changing constantly. These days, a Thanksgiving feast involving ex-spouses, step-children, biological children, half-siblings, etc., are commonplace. Divorces are par for the course. People are living longer and dying with considerable amounts of property. Property is being re-characterized all the time. Everyone should take the time to at least consider drafting a will.

Socialists rejoice; Free Marketers… well, this ain’t your year

As reported in SF Gate and SocketSite, SF Supervisor Chris Daly plans to introduce a series of laws that are intended to help tenants in this time of economic crisis, and accordingly will anger landlords.

The proposals include the suspension of any rent increases that would cause a tenant’s rent to exceed one-third of their income; expansion of the rights of tenants who want to add roommates to help pay their rent; and limiting the amount of “banked” rent increases — where annual rent increases allowed under city laws are saved up and then imposed at one time — to 8 percent.


With our country nationalizing a piece (or more) of just about every bank, it should be anticipated that this type of legislation would at least be discussed. However, I can see landlords’ angry resistance to this type of maternal/paternal legislation, since the free market is such a big part of our economy, and let’s be honest, our culture. As counterpoint to Supervisor Daly’s planned legislation, arguments can be made (here and here) that the market will work itself out if allowed.


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