Major Wage-Theft Claim Backlog Due to Severe Understaffing at California Labor Agency, Audit Finds

Severe understaffing, slow hiring, poor training and inefficient bureaucracy combine to slow California’s investigations of wage theft claims, the state auditor’s office concluded Wednesday.

The result, according to the audit of the state Labor Commissioner’s Office, is a backlog of 47,000 claims that take six times longer to resolve than the four months set in state law.

Workers are left waiting years for money they claim they are owed when their employers fail to pay the minimum wage, overtime premiums or legally required break times. Then, those who need the office’s help to collect on their back pay only get all their money back 12% of the time.

The audit confirms the findings of several recent news reports on the problem, including a 2022 CalMatters series detailing long waits and low payouts for workers making claims.

The audit stated that it would take the Labor Commissioner’s Office wage claims unit nearly 900 staff members to fully address the backlogs and handle claims in the time required by law. That’s almost three times the positions the unit currently has — about a third of which are vacant.

Though auditors pinned the office’s crisis largely to the understaffing, it also found:

• The office has a unit to help workers who win their claims recover the money from resistant employers by placing liens on property, levying bank accounts or, in some cases, revoking the employers’ business licenses. However, that unit didn’t recover any of the money in most cases and often did not use all the methods available.
• Hiring is overseen by two different human resources departments: the Labor Commissioner and that of the larger Department of Industrial Relations. The auditor found the slow process resulted in the office losing qualified candidates. Pay is also sometimes lower than comparable state and local government jobs, the audit found, particularly for hearing officers.
• The audit criticized the office for failing to adequately train new staff and supervisors and for using a case management system that was rife with inaccuracies and unreliable data, making it difficult for the office to track the progress of wage claims.

In response to the report, Katrina S. Hagen, the industrial relations director, wrote that the office is working on improvements to the case management system and conducting a study of staff salaries to improve retention. She also noted California is passing increasingly complex new labor laws that may prevent the office from meeting case deadlines even with enough staffing.

The wage claim system is decades old. In recent years, California labor officials have increasingly tried alternative enforcement methods, including workplace-wide investigations in low-wage industries with the help of worker advocates. Last week, they announced they would award $8.5 million to 17 local prosecutors to bring criminal charges against problem employers.

However, advocates said the individual claim system is still an important way for workers who believe they’ve been underpaid to recover small amounts without hiring a lawyer.

The audit immediately prompted labor leaders to call for the state to prioritize hiring at the Labor Commissioner’s Office. The California Labor Federation said the office should get emergency hiring authority.

“Today’s audit findings demonstrate that California workers face an enforcement crisis,” federation leader Lorena Gonzalez said in a statement. “Our state enforcement agencies weren’t designed to handle this magnitude of labor law violations.”

Sen. Steve Glazer, an Orinda Democrat who pushed for the audit last year in response to the news reports, lambasted the office.

“The California State Auditor’s report makes clear that our State Labor Commissioner is a toothless enforcer of our wage theft laws,” he said in a statement. “Immediate and decisive action to restore integrity and effectiveness to the Labor Commissioner’s office is needed.”

But Glazer isn’t planning any bills to address the issue, his spokesperson Steven Harmon said.

The release of the audit puts pressure on lawmakers and business and labor lobbyists to reach a deal in a simmering battle over another California labor law. A longtime target of the California Chamber of Commerce and other employers’ groups, the Private Attorneys General Act allows workers with private lawyers to take on the role of the state in suing their employers for alleged violations.

The class-action suits brought against employers generate about $200 million a year in penalties that get deposited into a fund for state labor enforcement efforts. Workers’ advocates argue those cases are also diverted from what would be an even worse backlog for the Labor Commissioner’s Office.

A Chamber-backed measure to repeal the law is scheduled to be on voters’ ballots in November, though business and labor groups have until late June to reach a compromise that could be passed by the Legislature instead.

“This is absolutely the worst time to even consider” repealing the law, said Alexandra Suh, co-president of the California Coalition for Worker Power and executive director of the Koreatown Immigrant Workers’ Alliance in LA.

The alliance has been helping workers file wage claims for more than 30 years, and Suh said delays at the office have been a longstanding problem.

“This audit is even more clear evidence in my mind that we need to preserve PAGA, preserve the right of workers to stand in the shoes of the state to address violations and relieve pressure on the Labor Commissioner’s Office,” Suh said.