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(August 2004)
California’s Infamous “Bounty Hunter” Law
Reformed
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All
employers
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Either effective immediately, or retroactive to January 1, 2004
(see below for details)
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California’s infamous “Bounty Hunter” law
has been reformed to make it less susceptible to abuse, which
is a welcome relief for law-abiding employers.
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The “Bounty Hunter” law went into effect on January
1, 2004, and provided financial incentives for employees to bring
lawsuits against their employers for any infraction of the Labor
Code — no matter how trivial the infraction (see “Private
Attorney General Act”, The Strategic EMPLOYER, November
2003, page 3). Employees who brought such suits would receive
25% of any penalties imposed against the employer. The penalties
varied, but were in the range of $100 per employee at the company,
multiplied by the number of pay periods during which the violation
occurred. For companies with a lot of employees, such penalties
could shut a business down.
Within just
a few months, lawyers had filed more than 60 major lawsuits
seeking penalties for minor infractions. The most notorious
of these involved Labor Code Section 431 — an obscure law
that required employers to file a sample of their employment
application form with the State. Interestingly, the State agency
designated to receive those forms generally did not even know
what to do with them. Employers who failed to meet this meaningless
requirement faced total ruin under the Bounty Hunter law. The
climate of fear created by this situation led to a number of
proposed changes, ranging from a total repeal of the law to only
modest changes (see “Bounty Hunter Law”, The Strategic
EMPLOYER, June 2004, page 2).
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Provisions
of Major Overhaul of Law
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As part of
the State budget agreement, on July 27, 2004, the Governor
signed into law a major overhaul of the Bounty Hunter
law. The new law requires potential plaintiffs to file a written
notice with both the State enforcement agency and the employer
before the plaintiff may file a lawsuit. The notice must provide
all pertinent information regarding the alleged Labor Code violation.
The employer then has a thirty-day opportunity to cure the problem.
If the employer does not fix the problem, the agency still has
the opportunity to take jurisdiction of the matter. If the matter
is not resolved to the satisfaction of the complaining employee,
then a suit may be filed. An employer cannot take advantage of
the “opportunity to cure” safe harbor more than three
times for the same alleged violation, even if the violations
occurred at different work sites.
The new law
also give the courts the authority to award a penalty of less
than the maximum set by statute. This means that the
severity of the punishment is more likely to be proportionate
to the severity of the violation. To reduce the likelihood of
unethical lawyers trying to “shake down” companies
with “cost-of-defense” settlement demands, the court
would be required to review and approve settlements of Bounty
Hunter claims. The new law also provides that there can be no
Bounty Hunter suits brought for a mere failure to post a notice
or file a document. The only exceptions will be where the posting
or filing relates to a safety or wage-and-hour matter. And, in
recognition of the pointlessness of filing employment applications
forms with the State, Labor Code Section 431 was repealed. All
of this was signed as emergency legislation, making it effective
immediately; plus, the new measures were also made retroactive
to January 1, 2004, which will have a major impact on the Bounty
Hunter suits currently on file.
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The new law still allows for Bounty Hunter suits, but the hope
is the it will result in minor problems being resolved by fixing
the problems, rather than by bringing lawsuits. In concept, only
scoff-law employers would need to worry about such suits. Penalties
could still be huge, but a court would be involved in ensuring
reasonableness. While the law is still too new to tell if it
will have the desired effects, the change certainly bodes well
for a new era of common sense in California.
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This
material is a general overview of the subject matter, and
is not meant to provide professional opinions regarding any
specific case, matter, or set of facts, or to substitute
for the professional advice of Waag and Co. Instead, please
contact Susan S. Waag, Esq. for additional information. Use
of this information is allowed, provided that credit is given
to: Susan S. Waag, attorney; Waag and Co.; September 2001
Employer Bulletin; INFO@WaagandCo.com;
(805) 783-2300
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