Tag Archives: SB 588

NEW CASE: California Employers Beware – Business Owners Can Be Held Personally Liable For Wage And Hour Violations

In a recent case (Atempa v. Pedrazzani), the California Court of Appeal held that an owner of a restaurant can be held personally liable for violations of California’s wage and hour law.

In this case, two former employees of a restaurant filed a claim against the restaurant (business entity) and the owner of the restaurant (personally) for unpaid wages.  Specifically, the former employees claimed that they were not paid minimum wage and overtime in accordance with California law.

By including the owner of the restaurant in the lawsuit, the former employees were testing whether the amendments made to California Labor Code §558.1 through the A Fair Day’s Pay Act (SB 588) really meant that certain individuals could be held personally liable for wage and hour violations without first “piercing the corporate veil” (i.e. claiming that the employer engaged in fraud, failed to follow corporate formalities, or the company was inadequately capitalized). Continue reading NEW CASE: California Employers Beware – Business Owners Can Be Held Personally Liable For Wage And Hour Violations

New California Law Creates Individual Liability for Wage and Hour Claims

Most of the discussion of recently passed SB 588 has focused on the increased authority given to the California Labor Commissioner to enforce wage and hour violations. Yet, tucked away at the end of this bill is a provision that changes the landscape of California wage and hour law.

Until the passage of SB 588, there was absolutely no individual liability for state wage and hour violations in California. This meant that employees were not permitted to sue individual managers, officers and directors for the Company’s violations of provisions of the California Labor Code. SB 588 changes this long-standing rule.

SB 588 adds a new section to the California Labor Code (§558.1) that creates individual liability for certain “high level” employees for violations of certain sections of the California Labor Code.

Specifically, newly enacted California Labor Code 558.1 states:

Any employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated, Sections 203 {payment of wages on termination of employment), 226 {paystub reporting requirements}, 226.7 {meal period premium}, 1193.6 {recovery of attorney fees for lawsuits to recover unpaid minimum wage and/or overtime}, 1194 {failure to pay minimum wage for all hours worked}, or 2802 {reimbursement of business expenses}, may be held liable as the employer for such violation.

The term “other person acting on behalf of an employer” is limited to a person who is an owner, director, officer, or managing agent of the employer.

What does this mean for employers? With the passage of this law, there is a greater likelihood of “high level” employees facing individual lawsuits from disgruntled employees for the Company’s wage and hour violations. Before this law goes into effect on January 1, 2016, employers should evaluate their overall wage and hour compliance strategies and consider expanding the scope of their directors and officers insurance coverage.