Executive Summary: The D.C. Council is seeking to amend the D.C. Wage Theft Prevention Act less than one year after the last amendment. If passed, the amended law would substantially increase penalties, create an onerous formal hearing process, impose liability on contractors for subcontractors' actions, and give the District the ability to suspend business licenses.
D.C. Wage Theft Prevention Act:
In July 2013, the D.C. Council passed, as part of its 2014 budget, the Wage Theft Prevention Amendment Act of 2013, which went into effect on October 1, 2013. This amendment provides that employees who are owed unpaid wages may be eligible to collect the back wages owed, plus damages of up to three times the amount of unpaid wages owed – essentially, quadruple damages.
The Proposed Amendment:
The Council is now seeking another amendment to further strengthen these employee protections. On February 14, 2014, three Councilmembers, Vincent Orange, Jim Graham, and Mary Cheh, co-introduced the Wage Theft Prevention Act of 2014. Seven other Councilmembers co-sponsored the bill. That same day, it was referred to Committee on Business, Consumer, and Regulatory Affairs, of which Councilmember Orange is the Chair.
The proposed bill would increase the penalties from $300 per affected employee for a first offense to up to $10,000 per employee. The bill also seeks an onerous formal hearing process and a requirement that employers provide written notice to their employees of the terms of their employment. Finally, the bill would create joint and several liability between contractors and subcontractors.
Businesses in the District of Columbia should be concerned about this bill. First, the amendment would allow for formal hearings held by Administrative Law Judges (ALJs). These hearings would be on the record and would result in findings of fact and conclusions of law, which would be enforceable in a court of law. Further, these hearings would have to take place within 45 days of the request for the hearing. The amendment would also grant the ALJs subpoena power, allowing them to compel the cooperation of companies. These procedures will create an extra burden on employers, as well as D.C.'s Department of Employment Services, which already has limited resources.
Moreover, in addition to the increase in penalties, the amendment would allow business licenses to be suspended for non-compliance. The suspension of business licenses could adversely affect employers that are fighting allegations in good faith and could have negative ramifications in the business community.
Finally, the fact that contractors and subcontractors would be jointly and severally liable is another concern. Large businesses frequently work with numerous subcontractors. However, these companies generally do not have systems in place that allow for constant oversight at the subcontractor-employee level.
Status of Bill:
On March 14, 2014, the Council held a public meeting. Over 75 people showed up in support of the bill. The majority of the speakers spoke of their own wage theft experiences. However, it does not appear that the business community was represented at the meeting.
This week, the Committee reported on the proposed bill. The released draft is virtually identical to the February 2014 proposed draft. The Committee has unanimously recommended the bill's approval to the Council.
However, the Committee members did express concern about several of the provisions, especially the contractor and subcontractor language. Councilman David Grosso proposed adding a section to clarify that only when a subcontractor is alleged to have failed to pay an employee wages earned due to lack of payment from the general contractor can the contractor be jointly and severally liable to the subcontractor's employees for the subcontractor's violations.
Councilman Grosso noted that because subcontractors have separate hiring practices from general contractors, it would be unfair to hold both responsible for one's improprieties. The Committee agreed to address this concern between the report from the Committee and the first reading to the full Council.
The Committee also expressed concerns about the removal of "willfully" from the current penalty section. The Committee discussed the possibility that an employer could be fined $10,000 and face up to six months in jail even if wages were withheld by mistake. The Committee has asked the general counsel's office to opine on this issue prior to the first reading to the Council.
The Committee report also contained a Fiscal Impact Statement from D.C.'s Chief Financial Officer. Critically, the report states that D.C. does not have sufficient funds to implement the bill. The bill is projected to cost almost $600,000 in Fiscal Year 2015 and more than $2 million in Fiscal Years 2015-2018. Most of these costs are projected for the Department of Employment Services and Office of Administrative Hearings, where additional staff would be needed to process and investigate the additional complaints and then adjudicate the appropriate cases.
In conclusion, the Committee has approved the bill as written, but revisions likely will be made before it is read to the full Council for approval. Moreover, the costs associated with the bill may give the Council pause. This bill is still in the very early stages and it is difficult to predict its success. However, it appears to have great Council support, since it was sponsored by 10 of the 13 Council members. It also has the backing of the Employment Justice Center, which released a report on wage theft in D.C. and has vocally supported the amendment.
Employers' Bottom Line:
Again, the bill is in the very early stages. When the bill is ready, it will have to go through two readings at a Council meeting. After the readings, the bill will go to the Mayor to either sign or veto. If the Mayor signs it, which seems likely, it will go to Congress for a 30-day review period. Bills usually pass without any action by Congress. However, concerned businesses should contact their local Congressional representative to voice their concerns with this amendment, especially the ALJ hearing provisions, the potential for suspension of business licenses, and the joint and several liability language. Otherwise, it appears that this amendment will eventually become D.C. law.
Once passed, employers will need to be aware of the new recordkeeping and notice requirements and familiarize themselves with the formal hearing process.