?The budget bill currently under consideration in Sacramento contains a startling and momentous provision: reinstatement of the California Industrial Welfare Commission (IWC), which in the past had regulated the wages, hours and working conditions of employees in California.
The reestablishment of the IWC portends new and more burdensome minimum wage, overtime, meal and rest period and related obligations for employers. A refunded IWC could venture into new areas that have blossomed in the last 20 years in labor and employment law: joint employment, independent contractor status, predictive scheduling, leaves of absence and the like.
The currently pending 2023-2024 California budget bill provides $3 million to find the IWC, which would convene by Jan. 1, 2024, and prioritize for consideration industries in which more than 10 percent of workers are at or below the federal poverty level.
The IWC was created in 1913 to regulate the wages, hours, and conditions of employment. As part of the 2004-2005 fiscal year budget, the IWC was defunded.
The five members of the IWC are appointed by the governor, with the consent of the state Senate. The commission must be composed of two representatives of organized labor who are members of recognized labor organizations, two representatives of employers, and one representative of the general public. By statute, the commission must include members of both sexes. Members serve four-year terms.
Rulemaking Process
The Administrative Procedure Act (APA) establishes rulemaking procedures and standards for state agencies in California. The APA does not apply to the IWC. Rather, the IWC is subject to its own set of procedural rules identified in the Labor Code and the California Code of Regulations. This is significant. Most state agencies and departments are permitted to enact regulations only if they are approved by the Office of Administrative Law (OAL), which undertakes a comprehensive and rigorous review of proposed regulations for APA compliance and conformance with statutory authority. The IWC does not have the burden of OAL scrutiny and is relatively free to enact its regulations, so long as it comports with an abbreviated hearing process.
Before adopting any new rules, regulations, or policies, the IWC must consult with the California Occupational Safety and Health Standards Board (OSHSB)to determine those areas and subject matters where the jurisdictions of the IWC and the OSHSB overlap. In the case of an overlap, the OSHSB has exclusive jurisdiction over safety and health issues.
The IWC has authority to convene wage boards to determine if wages are inadequate or working conditions are harmful to the health, morals, or welfare of employees. Wage boards are composed of equal numbers of representatives of employers and employees, and one non-voting representative of the commission. Wage boards can make recommendations back to the full IWC.
What Could Come Next?
Should the IWC be refunded, the governor will need to evaluate candidates and make appointments. All five will be subject to confirmation hearings in the California Senate. This will take time. Also, the commission will need to be staffed up, and those staff members will need to be hired pursuant to the state Civil Service Act examination and selection procedures. These procedures require an open, competitive process and can take a great deal of time. The process will not unfold overnight, so it may be quite a few months before a refunded IWC actually gets down to business.
This development is vitally important to virtually every business in the Golden State.
Interested employers should consider taking steps now to:
- Become familiar with the process by which the IWC conducts its business. These procedures have been dormant for 20 years. The business community is going to need to take advantage of the opportunity to have its voice heard in future IWC and wage board hearings.
- Understand the difference between the legislative process and the regulatory process, which will be employed by the IWC. Each forum presents its own challenges and opportunities. The IWC enacts rules and regulations through a quasi-legislative process, which is a blend of legislative and regulatory processes and procedures. Great deference is given to the IWC rules from the state’s courts because it is a quasi-legislative entity.
- Coordinate efforts with those who practice before the California Occupational Safety and Health Standards Board. Their experience and knowledge of the process of working with a state agency focused on workplace regulations likely will be invaluable as options and strategies are developed for dealing with the IWC.
Michael Lotito and R. Brian Dixon are attorneys with Littler in San Francisco. Bruce Sarchet and Joy Rosenquist are attorneys with Littler in Sacramento, Calif. ©2023. All rights reserved. Reprinted with permission.
