Recognizing that many California employees have had a difficult time collecting on wage claim judgments, the California legislature passed SB 588 and AB 980 to expand the authority of the California Labor Commissioner’s not only investigate wage claims, but also to issue citations and collect on a judgment relating to a violation of the minimum wage laws and the wage provisions in the Industrial Wage Orders. The California Labor Commissioner will now be able to investigate, issue citations, and collect judgments on violations of the wage and hour laws. Most importantly, the bills further provide for personally liability of a corporation’s or LLC’s owners, managers, directors and officers on unpaid wage claims.

SB 588 increases the Labor Commissioner’s ability to enforce a judgment. It authorizes the California Labor Commissioner to file a lien on the employer’s real estate, a levy on an employer’s property, bank accounts and accounts receivable, and even impose a stop order on an employer’s business to assist an employee in collecting a judgment for unpaid wages. More importantly, SB 588 adds California Labor Code § 558.1 and AB 970 amends California Labor Code §558 and §1197.1, to provide that even if the employer is a corporation or limited liability company, the owners, directors, officers, or managing members of the entity may be held personally liable for unpaid wages owed to an employee, interest, as well as any civil penalties imposed. Finally these two bills provide that if a California employer fails to remit payment on a judgment within 30 Days after the time to appeal has expired, the California employer must either obtain a surety bond that covers the value of the judgment (up to $150,000), or cease doing business in California.

California Labor Code § 558.1, states in pertinent part,

Any “other person acting on behalf of an employer” (defined as a natural person who is an “owner, director, officer, or managing agent of the 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 [certain designated sections of the Labor Code], may be held liable as the employer for such violation.”

California Labor Code § 1197.1(a) states, in pertinent part,:

“(a) Any employer or other person acting either individually or as an officer, agent, or employee of another person, who pays or causes to be paid to any employee a wage less than the minimum fixed by an applicable state or local law, or by an order of the commission shall be subject to a civil penalty, restitution of wages, liquidated damages payable to the employee, and any applicable penalties imposed pursuant to §203 as follows:

(1) For any initial violation that is intentionally committed, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee is underpaid. This amount shall be in addition to an amount sufficient to recover underpaid wages, liquidated damages pursuant to §1194.2, and any applicable penalties imposed pursuant to§203.

(2) For each subsequent violation for the same specific offense, two hundred fifty dollars ($250) for each underpaid employee for each pay period for which the employee is underpaid regardless of whether the initial violation is intentionally committed. This amount shall be in addition to an amount sufficient to recover underpaid wages, liquidated damages pursuant to Section 1194.2, and any applicable penalties imposed pursuant to Section 203.

(3) Wages, liquidated damages, and any applicable penalties imposed pursuant to § 203, recovered pursuant to this section shall be paid to the affected employee.”

Although the Labor Commissioner has always had the authority to investigate and enforce violations of the minimum wage and overtime laws set forth in the Industrial Wage Orders, effective January 1, 2016, the California Labor Commissioner now has the authority to issue citations and penalties (both criminal and civil) for industrial wage order violations. In addition to recovering actual wages owed, the Labor Commissioner may now assess a civil penalty as follows:

1. For an initial violation, the Labor Commissioner may asses a civil penalty of $50 or $100 for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages; and
2. For each subsequent violation, a civil penalty of $100 or $250 for each underpaid employee for each pay period for which the employee was underpaid.

The new law also authorizes the California Labor Commissioner to enforce Labor Code §2802, which requires employers to reimburse employees for all work-related expenses.

The procedures for issuing, contesting, and enforcing judgments for citations, or civil penalties, issued by the Labor Commissioner are set forth in California Labor Code §1197.1.