AB 40

Under current law, the Department of Workforce Development (DWD) must

investigate and attempt to adjust any claim by an employee that his or her employer

has not paid the employee any wages that are owed to the employee (wage claim).

Currently, DWD or an employee who brings a wage claim action has a lien upon all

property of the employer, real and personal, located in this state for the full amount

of any wages owed to the employee (wage claim lien). Currently, a wage claim lien

takes precedence over all other debts, judgments, decrees, liens, or mortgages

against an employer, except for a lien of a commercial lending institution that

originates before the wage claim lien takes effect (prior lien), regardless of whether

those other debts, judgments, decrees, liens, or mortgages originated before or after

the wage claim lien takes effect. Current law provides, however, that a wage claim

lien takes precedence over a prior lien of a commercial lending institution as to the

first $3,000 of unpaid wages covered under the wage claim lien that are earned

within the six months preceding the filing of the wage claim with DWD or the

commencement of an action by the employee to recover the wages due.

This bill eliminates that $3,000 cap and six-month time limit so that under the

bill a wage claim lien covering any amount of wages earned at any time takes

precedence over a lien of a commercial lending institution, regardless of whether the

lien of the commercial lending institution originated before or after the wage claim

lien takes effect.

The bill also provides that a wage claim lien takes precedence over the rights

of any purchaser of any property of the employer, including any bona fide purchaser

that purchases the property of the employer at the time of commencement of a

bankruptcy proceeding, that is, the trustee in bankruptcy. This change reverses

In

Re Globe Building Materials, Inc.,

463 F. 3d 631 (7th Cir. 2006), which held that the

trustee in bankruptcy could avoid a wage claim lien because under the current wage

claim lien law a wage claim does not expressly take precedence over the rights of a

bona fide purchaser under the federal bankruptcy law.

Finally, the bill permits a recognized or certified collective bargaining

representative of an employee to file a wage claim with DWD, or to bring a wage claim

action in court, on behalf of an employee and grants a wage claim lien to a collective

bargaining representative that brings a wage claim action.