California's Fair Day's Pay Act Creates Personal Liability for Wage and Hour Liability

As of January 1, 2016, any individual who is an owner, director, officer, or managing agent of an employer may be held liable as the employer if he or she violates, or causes to be violated, wage and hour provisions. Cal. Lab. Code § 558.1. The California Supreme Court has defined "managing agent" as an employee who "exercise[s] substantial discretionary authority over significant aspects of a corporation's business." White v. Ultramar, 21 Cal. 4th 563, 577.

This section applies to violations of Industrial Welfare Commission orders regulating minimum wages, hours, and days of work, as well as violations of Labor Code requirements governing itemized wage statements (Cal. Lab. Code § 226), meal, rest, and recovery periods (Cal Lab. Code § 226.7), and indemnification for and reimbursement of employment-related expenditures (Cal. Lab. Code § 2802). Further, individuals face personal liability for violations of remedial Labor Code sections authorizing penalties for an employer's willful failure to pay wages upon termination (Cal. Lab. Code § 203) and recovery of unpaid minimum wages and/or overtime compensation, including interest thereon and attorney fees and costs (Cal. Lab. Code §§ 1193.6, 1194).

In practice, section 558.1's impact on directors, officers, and managing agents will be limited as employers are required to defend or indemnify employees sued by third persons for conduct occurring in the course and scope of employment, including paying any judgment entered and attorney fees and costs incurred in defending the action. Cal. Lab. Code § 2802; see also Cassady v. Morgan, Lewis & Bockius LLP, 145 Cal. App. 4th 220, 230 (2006). Nonetheless, California's willingness to expand individual liability through the Fair Day's Pay Act underscores the importance of strict compliance with California's wage and hour requirements.

If you have any employment related matter that renders it necessary for you to consider consulting with an attorney, please contact Shulman Bastian Friedman & Bui LLP at 949-340-3400 or at www.shbllp.com and ask to speak with one of our trial attorneys with experience in handling employment law matters.

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