Risk Management Blog

Assembly Bill 2416, a bill currently moving through the California Legislature, could have negative effects on California business owners. The bill will allow an employee to place a lien on the personal property of their employer. Many organizations are opposed to this bill and have been vocal about their opposition, including the California Escrow Association. Below is the CEA’s stance on the bill:

AB 2416 (Stone) would allow an employee, employee representative, or even a creditor of the employee to record a lien against an employer’s real and personal property for alleged unpaid wages, without any review by a court or the Labor Commissioner to determine validity.

AB 2416 provides no protections to innocent property owners against erroneously recorded liens, and grossly insufficient remedies for the property owner harmed by the actions of an employee or former employee.

As an escrow holder or title insurer, if AB 2416 were to pass, you would be faced with recorded “wage liens” filed by persons likely unknown to you and who are not parties to your transaction. You would then need to engage in further fact-finding to ascertain if the liens were valid, and possibly to assist with obtaining information to pay the lien(s), a surety bond to assure payment, or otherwise to obtain lien releases and instructions, or await action of a court or the Labor Commissioner, prior to closing a transaction.

We seek your help in defeating AB 2416, and ask that you fax, call, and email your California Senator and Assembly Member today to request his or her “NO” vote on AB 2416 when it next comes before them. We have provided talking points below.  The most effective letter includes a few of these points together with specifics of how this would affect both you as well as consumers in your transactions.  If you are unable to write a letter, please at least call and express your concerns and your request for a “NO” vote.  For your convenience, please click HERE to find your California Senator and Assembly Member and CALL or FAX (or both) today.

CEA, CLTA, and a substantial coalition (see our letter, attached) are opposed to AB 2416, which would:

– Allow employees, employees’ representatives, and third-party creditors, to file pre-judgment wage liens against the real property of innocent third party homeowners and the real and personal property of an employer.

– Interfere with financing opportunities and real estate transactions for third party homeowners and employers.

– Harm businesses, from small to large, by potentially flooding them with unsubstantiated wage lien claims.

– Violate due process as there is no realistic opportunity for an employer or third party to prevent the taking of their property through the recording of a pre-judgmentwage lien.

– Force innocent third parties and the employer to incur costs and attorney’s fees to remove liens from real and personal property.

AB 2416:

– Is not limited to minimum wage violations – but includes all wage violations and all penalties under the Labor Code, as determined by the employee without having to prove the lien validity to an independent court or state agency that would normally require proof of validity BEFORE the lien is recorded.

– Is a threat to property owners – any remedies in the bill do not begin until afterthe lien is recorded.

– Provides opportunities for misuse with grave consequences and insufficient remedies.  Though the bill prohibits the use of the lien unreasonably or in bad faith, a disgruntled employee could effectively delay an employer’s sale, purchase, or refinance of real or personal property, to the great detriment of the employer. The maximum recovery by an employer against whom a lien is wrongfully recorded is a fine of up to $1,000 and possible recovery of attorney fees and costs, at the discretion of the court.

Under AB 2416, if an employer was selling, buying, or refinancing real property (or personal property subject to a security interest), the filing of a lien by an employee, agent of the employee, or third party creditor of the employee (“lien claimant”) would effectively stop that transaction from proceeding, resulting in delays and potentially terminating otherwise successful transactions.  California’s real estate market, recovering in some places and still tenuous in others, can ill afford this uncertainty.

Beware that proponents of AB 2416 will falsely assert:

– That there are not adequate remedies for recovery of unpaid wages without costly proceedings.  Just last year, the business community supported AB 1386, which provided the Labor Commissioner with an earlier opportunity to review and lien property, to protect the interests of employees. The Labor Commissioner launched the corresponding campaign against wage theft on April 30, 2014 (www.wagetheftisacrime.com).

Insufficient time has elapsed since the passage of AB 1386 to suggest a problem remains, and the legislature should allow adequate time to determine the effectiveness of those remedies rather than acting hastily with further changes

– That the bill will not result in erroneous recordings of wage liens on the wrong property, or against the wrong party.  Though the bill provides that a lien may not be filed on the employer’s primary residence, filers of wage liens will likely not search the county records adequately to determine the correct property on which to file the lien.

– That the bill provides for adequate safeguards against the filing of invalid liens.  Though the bill currently provides that an employer may “bond around” a lien or that liens are not valid where there a collective bargaining agreement is in place, AB 2416 would place an undue burden on property owners, escrow holders, title insurers, and others, to ascertain non-public information to determine the validity of the lien.

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