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California court ruling puts managers at risk

In 2016, the California legislature passed the Fair Day's Pay Act, a law that was intended to assist employees in collecting judgments against judgment proof employers for wage and hour violations. Specifically, Section 558.1 of the Act provides that individuals working on behalf of the employer, such as managers, are personally liable for wage and hour violations.

In 2018, the California Court of Appeal issued a ruling that emphasizes the need for managers to be vigilant about complying with wage and hour laws due to potential personal liability for wage claims. In Atempa v. Pettrazini, two restaurant employees were awarded $30,000 in civil penalties, in addition to attorneys' fees and interest, for the restaurant's failure to pay minimum wages, regular wages and overtime wages. The restaurant had also failed to submit timely wage statements.

On appeal, the Court determined that the Act did, in fact, impose personal liability on the restaurant's owner, who also served as the president, secretary and director of the organization, for wage and hour violations even where there was no evidence of fraud. The Court concluded that terms of Section 558.1 left no doubt regarding the intent of the California legislature.

The Court noted that other California laws require employers to defend or indemnify employees from lawsuits arising from conduct occurring during the course of their employment. However, since the restaurant had filed for bankruptcy, the restaurant's owner was personally liable for paying the $30,000 civil penalty and $300,000 in attorneys' fees to the restaurant employees. Given the potential for personal liability, managers should take care to comply with wage and hour laws in California to reduce their exposure.

Source: National Law Review, "Managers Beware: Cam you be held personally liable for wage and hour violations?", Michaela R. Goldstein and Michael T Campbell, December 21, 2018.

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