California Could Revive The Industrial Welfare Commission

• Published date: 29 June 2023
• Subject Matter: Employment and HR, Health & Safety, Employee Benefits & Compensation, Employee Rights/ Labour Relations
• Law Firm: Littler Mendelson
• Author: Mr Michael Lotito, Bruce Sarchet, R. Dixon and Joy C. Rosenquist

California budget bill includes a provision to reinstitute the dormant Industrial Welfare Commission (IWC), which would impact virtually every employer in the Golden State. The IWC would have the power to convene industry-specific wage boards to regulate the wages, hours, and working conditions in various industries through new orders, and the authority to issue subpoenas and conduct discovery. The IWC could enact rules and regulations through a quasi-legislative process not subject to APA oversight.

As happens this time every year in California, legislators and the governor are crafting a state budget for the upcoming fiscal year. 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 re-funded IWC could also potentially 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 re-funding of the IWC suggests a desire on the part of some interests in the legislature to pursue changes through administrative action that would not be palatable in the legislative process. All California businesses will be potentially impacted by this development. Indeed, the California Business Roundtable has already issued a statement expressing its concern about the re-funding of the IWC.

The current pending 2023-2024 California Budget Bill Provides:

... Of the amount appropriated in Schedule (5), $3,000,000 shall be available for the Industrial Welfare Commission to convene industry-specific wage boards and adopt orders specific to wages, hours, and working conditions in such industries, provided that any such orders shall not include any standards that are less protective than existing state law. The commission shall prioritize for consideration industries in which more than 10 percent of workers are at or below the federal poverty level. The Industrial Welfare Commission shall convene by January 1, 2024, with any final recommendations for wages, hours, and working conditions in new wage orders adopted by October 31, 2024.¹

This Insight will provide a brief overview of the IWC, prior legal challenges to the authority of the Commission, and a look at the next steps that would be required to re-constitute the IWC, and will provide practical suggestions for California employers moving forward.

IWC History and Powers - A Brief Overview

The IWC is granted powers and authority in the California Constitution. Article 14, Section 1, states:

The Legislature may provide for minimum wages and for the general welfare of employees and for those purposes may confer on a commission legislative, executive, and judicial powers.

In addition, California Labor Code section 1173 sets forth the duties of the IWC:

It is the continuing duty of the Industrial Welfare Commission ... to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees.

The IWC was...