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Don Welker's Financial Minute

May 14, 2019, 9:00 AM


It’s no secret that California has extensive and stringent wage and hour laws. From overtime, sick pay and meal breaks to rest periods, wage statements, reimbursement of business expenses and more, it’s all covered—generally in excruciating detail.

You already know that if you violate these laws your company can be slapped with fines and lawsuits. But did you realize that you can be held personally liable as well?

It’s not just the company that’s on the hook
Under California Labor Code section 558.1, anyone who is an owner, director, officer or managing agent of an employer and who violates the Labor Code, or causes it to be violated, “may be held liable as the employer for such violation.” This is the case whether the violation was willful or not, whether or not the person was acting under someone else’s direction, etc.

For example, say a front-line supervisor is under pressure to get things done by a certain time each day. To make it happen he has workers delay their lunch hours. But because California law says that workers are entitled to a 30-minute meal break if they work five or more hours in a work day, the supervisor falsifies the timesheets to make it look like these breaks were taken at the legally-mandated time. Eventually, of course, one of those workers files a complaint with the appropriate government department. In a situation like this the business can be fined, and the supervisor (as well as, perhaps, upper management) can also be held personally liable for these violations.

Even bankruptcy won’t get you off the hook
A recent court case, Atempa v. Pedrazzini, is a great reminder of just how expensive these lawsuits can be. In this situation two people sued their former employer, a restaurant. They alleged that the restaurant’s owner, Mr. Pedrazzini, did not pay overtime, minimum and regular wages as per the California Labor Code, and also did not furnish accurate wage statements in a timely fashion.

After these two former employees won their case the employer filed for bankruptcy. The plaintiffs appealed, and Mr. Pedrazzini was held personally liable for the entire judgement: Over $30,000 in civil penalties, plus $300,000 in attorney’s fees.

You must comply with the law
The reality is, the laws are so extensive that even the most conscientious employers can find compliance difficult. That said, I’ve also seen many employers who like to operate in what they consider to be “grey areas.” This is a dangerous way to go, because sooner or later they’re bound to be caught.

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