The Potential Impact of Individual Liability Under the Fair Day’s Pay Act

SB588 The Fair Day’s Pay Act, goes into effect in California as of January 1, 2016. Employers within the state should become familiar with the provisions of the Act because it greatly enhances the authority of a Labor Commissioner to enforce judgments for unpaid wages.

Under this new law, which begins at Code of Civil Procedure §690.020, the Labor Commissioner is authorized to issue stop work orders against employers (and successor employers) who have judgments against them for nonpayment of wages, to issue levies against employer’s bank accounts and accounts receivable, and to place liens against employer’s real and personal property.

The law also imposes criminal and personal liability against certain individuals that act for the employer such as owners, officers, directors and managing agents. Because of this new law, such individuals have potential personal liability where no liability previously existed.

The areas of potential individual liability are as follows:

(a) the violation of any provision regulating minimum wages or hours and days of work in any state Industrial Welfare Commission (IWC) wage order;

(b) waiting time penalties under Labor Code section 203;

(c) violation of the requirement to provide itemized wage statements under Labor Code section 226;

(d) failure to provide rest, meal and recovery periods under Labor Code section 226.7;

(e) actions to recover unpaid minimum wages and overtime under Labor Code section 1193.6 and 1194; and

(f) failure to pay expense reimbursements under Labor Code section 2802.

Based upon this new exposure for personal liability, it is imperative for all employers to review their wage and hour policies and practices to ensure that they are in compliance with all applicable laws.