Daily Overtime Reform Shifts to the IWC

After a year of legislative resistance to daily overtime reform, Governor Pete Wilson has requested that the Industrial Welfare Commission (IWC) consider amending California's overtime requirements through its rulemaking process.

The IWC, under authority granted to it by the California Constitution and the Labor Code, establishes rules governing wages, hours, and working conditions in separate wage orders for various industry groupings and occupations. The IWC has issued 15 wage orders, in addition to a supplemental order setting the minimum wage for all industries. Changes to rules governing wages, hours, or working conditions can be made either by the IWC or the Legislature.

This year, DIR sponsored Assembly Bill 398 (Aguiar) on behalf of Governor Wilson. AB 398 would prohibit the IWC from adopting any daily overtime requirements beyond the requirements of the federal Fair Labor Standards Act (FLSA) and thus conform California law on daily overtime with federal law. The FLSA does not require daily overtime, but requires the payment of overtime after 40 hours of work in a week.

Other than California, only Nevada, Wyoming, and Alaska require payment of daily overtime. The remaining 46 states conform with the weekly overtime requirement set by the FLSA.

AB 398 was considered in the Assembly Labor and Employment Committee last spring, but it did not advance because of a 4-4 party line vote. The bill's sponsor, Assemblymember Fred Aguiar, has made AB 398 a two-year bill that will be reconsidered in 1996 when the Legislature reconvenes. Since the vote on AB 398, the membership of the committee has changed and the committee now consists of a total of seven rather than eight members.

However, in the absence of legislative action, Governor Wilson has asked the IWC to consider reviewing and reforming daily overtime requirements through the commission's rulemaking process. In a September 8 letter to the members of the IWC, the Governor wrote, "In our modern, competitive economy and with a social climate in which employees increasingly face the challenge of balancing work and family schedules, Californians need the enhanced flexibility that would be available if our overtime requirements conformed with federal law."

The Governor's request went before the IWC for consideration. At its October 20 meeting in Sacramento, the members discussed opening a review. In the first step toward opening a formal review, the members voted to conduct five public hearings to investigate and receive comments on whether to appoint wage boards to review daily overtime requirements and/or other issues. While the Labor Code requires only one such investigative hearing, the IWC decided to conduct five hearings. The five hearings, expected to occur over four to five months, will be conducted around the state with exact times and locations to be noticed by the IWC shortly. In its resolution, the commission stated its intent to conduct public hearings in geographic locations that would yield comments from a broad diversity of industries. Thus, hearings are currently planned for Oakland, San Jose, Redding, Merced, and Long Beach.

These five hearings are the first step toward a possible reform of the IWC's daily overtime rules. Procedures that must be followed by the IWC in order to amend its wage orders are outlined in the Labor Code and are very laborious. If the IWC votes to open a formal review after the five hearings, it would appoint a wage board for each wage order it seeks to review. Presently, 14 of the IWC's 15 wage orders require daily overtime after eight hours of work. The wage order applying to agriculture is the exception. The IWC could decide to appoint wage boards to review all 14 wage orders requiring daily overtime, some of the 14 wage orders, or none of the wage orders. The Labor Code does not specify a precise number of members for a wage board, but it does require that a board consist of equal numbers of management and labor representatives of an affected industry or occupation.

After a wage board conducts a review, it reports to the IWC with any recommendations. If the IWC then decides to propose a change in any wage order, it must conduct at least three additional public hearings before a final vote.

Thus, the IWC's rulemaking process is lengthy and legislative action would be more expeditious. Curiously, at the hearing on AB 398, opponents of the legislation criticized the Administration for sponsoring legislation rather than requesting an IWC review -- and then attempted to insert language into the Budget Act prohibiting the IWC from using budgeted monies to consider any daily overtime reforms. But recently, the Governor was criticized for proceeding to rulemaking when the legislature had not enacted his proposals.

The IWC consists of five members appointed by the Governor and subject to confirmation by the Senate. Two members represent employers, two members represent organized labor, and the fifth member serves as a representative of the general public.

Note: Additional information can be found in the March-April 1995 Issue of DIR Bulletin