On January 1, 2016, a new law went into effect called the “A Fair Day’s Pay Act.” This law extends personal liability for Labor Code violations to owners, directors, officers, and managing agents of employers. It is assumed that they knew, or should have known, about any Labor Code violations taking place under their watch.
Before this, owners, directors, officers, and managing agents of an employer were broadly insulated from liability for Labor Code violations. This was due to discrepancies between laws and regulations that govern employer liability.
This act resolves those conflicts by changing the definition of employer or other person acting on the employer’s behalf, such as supervisors, payroll managers, or HR managers.
If employees with authority to act on behalf of the business commit wage and hour violations, employees can now bring Labor Code claims against them. The Labor Commissioner may investigate, hold hearings, and recover penalties from these individuals.
The A Fair Day’s Pay Act also extends liability to successor entities. These are new businesses that are “similar in operation and ownership” to the previous company. A new business is considered to be the same employer for the purpose of liability if its employees essentially:
- Work under the same supervisors
- Work in the same conditions
- Do basically the same thing as the old company
So an employer can no longer shirk liability by shutting down the company that committed the violation and opening another.
How to Seek Remedies
There are two ways employees can seek remedies for Labor Code violations. They can file an administrative claim with the Labor Commissioner, a government agency that oversees business operations and enforces employment laws. The other option is to file a private lawsuit against the employer or a person acting on the employer’s behalf.
New Ways to Enforce Judgments
The A Fair Day’s Pay Act allows the Labor Commissioner to enforce a judgment using any existing methods available to a creditor. Liens on property and levies on business assets can be used to seize property and assets of the employer and individual corporate owners, directors, officers, managing agents.
New penalties may also be sought in addition to the employee’s wages and attorney’s fees, and failure to pay a judgment within 30 days after the deadline to appeal will result in new consequences.
The Labor Commissioner can require the employer or a successor entity to post a bond to continue to do business in California. The employer can then lose their license if they fail to post the bond.
Exceptions to “A Fair Day’s Pay Act”
While the A Fair Day’s Pay Act opens up a lot of possibilities for litigation on how the law might apply, most corporate owners, directors, officers, and managing agents still have the right to indemnification for legal expenses. So an employer cannot hold employees responsible for lawsuits that result from them performing their required job duties.
This, however, does not protect employees in a position of authority who believed they were being asked to do something illegal, and then they did it anyway.
If you believe you have been a victim of a wage and hour violation, this new law might affect how you can take legal action. It is important that you speak with an experienced employment law attorney as soon as possible. As many employment claims have a short statute of limitations, delay could cause you to lose your rights to compensation.