AB 1003: California’s new wage theft law

Each year, more than 30,000 workers in California file wage claims, and the COVID-19 pandemic has further exacerbated the financial vulnerability of low-wage workers. In its recent session, the California Legislature sought to implement new wage protections for workers and to deter intentional wage theft by employers.

On Sept. 27, 2021, Gov. Gavin Newsom signed into law Assembly Bill 1003, which seeks to punish employers for intentionally stealing employees' wages. Under current law, employers who wrongfully and intentionally withhold wages from employees may be convicted of a misdemeanor. However, this new law goes one step further.

Introduced by Assemblymember Lorena Gonzalez, Assembly Bill 1003 makes the intentional theft of wages in an amount greater than $950 from any one employee, or $2,350, in the aggregate, from two or more employees, in any 12 consecutive month period, punishable as grand theft, an alternative felony or "wobbler." Under the California Penal Code, grand theft is punishable by imprisonment in a county jail for up to three years. AB 1003 does not expand or limit the scope of the existing statute on grand theft.

Of important note, for the purpose of this law, the word "employee" includes an independent contractor and "employer" includes the hiring entity of an independent contractor.

The new law defines "theft of wages" as the intentional deprivation of wages, gratuities, benefits or other compensation by unlawful means with the knowledge that the wages, gratuities, benefits or other compensation is due to the employee under the law.

You might ask, what is "intentional" wage theft? An employer acts "intentionally" when it deprives employees of wages to which they are entitled with knowledge that the wages are due. For example, knowingly refusing to pay overtime, paying less than minimum wage, or denying meal and rest breaks would qualify as intentional acts of wage theft.

Additionally, AB 1003 specifies that employee wages, gratuities, benefits or other compensation that are the subject of a prosecution for intentional wage theft may be recovered as restitution. Additionally, the law does not prohibit the employee or the labor commissioner from commencing a civil action to seek recovery of unpaid wages and other damages.

The key aspect of AB 1003 is the intentionality of the wage theft. Given the explicit "intentional" requirement, it is currently unknown whether this law will significantly impact the way employment laws are enforced in California. Unintentional mistakes by the employer or good faith disputes will likely not be actionable under the law. However, all employers -- including those who hire independent contractors -- should review their employee compensation policies and practices to ensure compliance with this law, which took effect on January 1, 2022. 