Back From the Dead: California Legislature Resurrects the Industrial Welfare Commission

By Brian J. Mills and Ashley McLachlan 

On July 10, 2023, Governor Newsom signed Assembly Bill 102 (“AB 102”), amending the Budget Act of 2023. Buried in this seemingly innocuous appropriations bill is a provision that could mean more burdensome wage and hour regulations for employers in the future.

AB 102 appropriates $3M for the currently defunct Industrial Welfare Commission (“IWC”). The IWC was originally a five-member commission within the Department of Industrial Relations, tasked with regulating wages, hours, and the working conditions of California laborers. When active, the IWC issued “Wage Orders” that applied to specific industries or occupations. Most California businesses and employers are intimately familiar with the requirements of their industries governing Wage Order, as each order sets forth regulations, including those pertaining to minimum wage, overtime, exempt employee classifications, and meal and rest periods. Nearly two decades ago, the California legislature defunded the IWC. The Wage Orders issued in 2001, though remaining in effect, have been largely unchanged, except with respect to the increasing minimum wage. With AB 102, the IWC will be resurrected, and the commission has been instructed to adopt new Wage Orders.

It is unlikely that any forthcoming revisions to California’s Wage Orders will provide relief to employers. AB 102 directs the IWC “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.” What this means for employers is that any orders or standards created by the re-funded IWC can provide further protections to employees and the IWC is explicitly limited from setting standards that could peel back some of the more burdensome regulations currently in place. For example, the IWC could venture into regulating independent contractor status — given the evolving developments in that area in recent years. AB 102 also appropriates funds to increase staffing for the Division of Labor Standards and Enforcement — the division currently tasked with enforcing IWC Wage Orders. 

Employers have until October 31, 2024 before new orders are adopted. The bill requires that the IWC “prioritize for consideration industries in which more than 10 percent of workers are at or below the federal poverty level” and is instructed to “convene by January 1, 2024, with any final recommendations for wages, hours, and working conditions in new Wage Orders adopted by October 31, 2024.” 

It is too soon to say with certainty what specific changes the IWC will make to California’s Wage Orders. What is clear, however, is that the changes to come will most likely provide further protections to employees. California employers are all-too familiar with navigating through the murky waters of California’s wage and hour laws. With AB 102, these waters could become even more treacherous.