California enacts powerful new Wage Theft law

On October 11, 2015, Governor Brown signed SB 588, the Fair Day’s Pay Act, into law.  The new law takes effect on January 1, 2016 and gives the California Labor Commissioner new ways to enforce judgments against employers who have engaged in wage theft by not paying workers all wages earned and owed.  Under this new law, the Labor Commissioner can now collect and enforce a judgment for unpaid wages by issuing a levy on the employer’s bank account or lien against the employer’s property.

Under the new law, workers may bring wage claims against the owners of the company and anyone else acting on behalf of the employer.  Therefore, any person noticed with a levy who does not comply will be personally liable for the full amount of the judgment levied.  If an employer fails to satisfy a judgment for non-payment of wages, the Labor Commissioner can require the employer to post a bond in order to continue doing business in the state.  The bond remains in effect until the judgment is paid and the bond amounts range from $50,000 for an unpaid judgment of $5,000, to $150,000 for unpaid judgments of more than $10,000.

The Labor Commissioner can also place a “stop order” on an employer prohibiting the use of employee labor until the employer meets the bond requirement.  The Fair Day’s Pay Act makes it a criminal misdemeanor for an employer, owner, director, officer, or managing agent of the employer to fail to comply with a “stop order.”

To even further protect workers from wage theft, successor employers may also be held liable and treated as the “same employer.”   A successor will be considered the “same employer” for purposes of liability if: (1) the employees of the successor employer are engaged in “substantially the same work in substantially the same working conditions under substantially the same supervisors,” or (2) the new entity has “substantially the same production process or operations, produces substantially the same products or offers substantially the same services, and has substantially the same body of customers.”

The law makes an individual or business entity that contracts out for services in the Property Services or Long Term Care industries jointly and severally liable for unpaid wages.  As a result, where the individual or business was given notice of a proceeding by the Labor Commissioner, where the employer was found liable for unpaid wages for services performed under the contract, the other individual or business entity may be held liable for the actions of the other employer.

Additionally, the law provides for non-licensure and license revocation for employers in the Long Term Care industry for conducting business without a bond or failing to satisfy an unpaid judgment.

Finally, the new law imposes civil penalties of $2,500 for the first offense and $100 for each calendar day that the employer continues to conduct business in violation of the law—up to $10,000.

This new law opens the door to significant and positive change for California working people and their families.

For more information on SB 588, please contact your labor law counsel.

By Monica Guizar | November 6, 2015

Legal Developments