SB 588: New tools to combat wage theft

Once in a while, it is not the flashy new laws generating all the buzz that require the most reflection. Sometimes it is a bill like Senate Bill 588 that leads with the banal, and saves the more dangerous stuff for later sections.

Admittedly, giving the labor commissioner the authority to collect on judgments for non-payment of wages and to act as a levying officer is not the sexiest legal change, and that is what Section 1 of the bill addresses. Section 2, which authorizes a levy on the employer bank accounts, and in theory anyone owing the employer money (perhaps customers) 20 days after the judgment is entered and technically before the time for appeal has expired, is more interesting.

And now skip to the end, where Section 10 creates new Labor Code Section 558.1, providing: "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, 226, 226.7, 1193.6, 1194, or 2802, may be held liable as the employer for such violation. For purposes of this section, the term 'other person acting on behalf of an employer' is limited to a natural person who is an owner, director, officer, or managing agent of the employer."

That translates into potential personal liability for senior management in the event of wage and hour violations springing from a wide variety of mishaps, ranging from defective pay day statements to rest and meal period violations and minimum wage events. But there is more to it than that. Because employee status misclassification or re-classification of independent contractors usually result in Labor Code Section 2802 issues (contractors bear their own expenses and employees must be reimbursed), rest and meal period issues and occasionally even minimum wage violations, individual liability may now exist even for issues that do not qualify as willful misclassification of employees as independent contractors under Labor Code Section 226.8.

What else is in SB 588?

* Labor commissioner hearings are expanded to include penalties and liquidated damages; thus, contesting an administrative outcome will entail a large appellate bond;

* Employers (including successors with similar ownership) who neither appeal nor pay a wage judgment must obtain a sizable bond ($150,000 if the amount owed is over $10,000) to continue doing business in the state, or face stiff penalties ranging from a minimum of $2,500 to $100,000. Labor Code Section 238. Continued operation without the bond can result in a stop order issued by the labor commissioner, who has a variety of lien rights;

* If the employer with the outstanding unpaid wage judgment is in the long-term care industry, the Department of Public Health or State Department of Social Services is empowered to refuse to renew any required licenses;

* Any business in the property services (janitorial, security, valet parking, landscaping and gardening services) or long-term care industry that contracts out portions of those services to other employers is jointly and severally liable for any unpaid wages.

So there it is, hidden in plain sight. SB 588 is not sexy, but as of Jan. 1, employers with California operations are in a new world of liability.

James M. Nelson is the chair of Greenberg Traurig LLP's Labor & Employment Practice in Sacramento and national co-chair of the firm's ERISA Litigation Practice.