Responding to recent public outcry over wage theft and the inability of state authorities to enforce judgments for unpaid wages, California has enacted a new law going into effect on January 1, 2016 that provides the Division of Labor Standards Enforcement (“DLSE”) three new tools to effectively collect pay owed to employees.
By creating and revising sections to the California Labor Code, SB 588 strengthens the ability of the DLSE to enforce meritorious wage claims that employers allegedly too often ignored. For example, an analysis by the National Employment Law Project and the University of California, Los Angeles found that of all wage claims workers won before the DLSE between 2008 and 2011, 83% of the workers were never paid a dime in judgment by the employer. To address this shortfall, the new statute authorizes several new measures for the Labor Commissioner to exercise to ensure enforcement of judgments for unpaid wages.
- Labor Commissioner Now Has Several New Powers to Enforce Satisfaction of a Judgment or Award for Unpaid Wages
• First, when issuing a warrant or notice of levy, the law provides the Labor Commissioner the ability to use any of the remedies available to a judgment creditor, including but not limited to enforcement of remedies through a Superior Court action.
• Furthermore, upon receipt of a writ of execution by a court, the Labor Commissioner may perform the duties of a levying officer when collecting an unsatisfied judgment or award. This includes the ability to place a levy on an employer’s property and serve a notice of levy upon any person that has in his or her possession or control any credits, money, or property belonging to the judgment debtor, including customers of the business that owe the employer payment.
• Most importantly, if a final judgment remains unsatisfied after a period of 30 days after the time to appeal has expired and no appeal is pending, the Labor Commissioner may issue a “stop order” prohibiting the employer from conducting any business in the state unless it obtains a bond from a surety company between $50,000 and $150,000 (depending upon the size of the unsatisfied portion of the judgment). This includes a prohibition against using the labor of another business, contractor, or subcontractor to conduct the employer’s business; in other words, the employer-debtor cannot “farm” out its production or services to another entity or close shop and re-start under a new business name if the work being performed is substantially similar to the prior business. Failure to comply with the “stop order” preventing the employer from conducting business can result in either civil monetary penalties ($2,500 for the first offense, and $100 for each calendar day the employer continues to do business in violation of the law up to $100,000) or imprisonment, or both. Additionally, the Labor Commissioner may create a lien on any personal property in California of an employer that conducts business in violation of the stop order.
- Definition of Who May Be Liable for an Unsatisfied Judgment Expanded to Include Individuals
Moreover, the law expands those who can be held liable for the unsatisfied judgment by expanding the term “employer or other person acting on behalf of an employer” to include a natural person who is an owner, director, officer, or managing agent of the employer. In other words, the Labor Commissioner can seek redress from the individuals managing the employer’s business, as well as the business itself.
- Joint and Several Liability for Individuals or Entities Using Property or Long-Term Care Employers for Personal Services
Finally, in a nod to concerns about industries involving personal services, any individual or business entity that contracts for “property services” or “long-term care services” are jointly and severally liable for any unpaid wages owed by the property or long-term care employer. This is to ensure that the Labor Commissioner has several avenues by which to collect judgment to avoid legal issues related to disputes involving co-employment or independent contracting relationships that are prevalent in these types of personal service industries.
- Recommended Actions for Employers
As a result of the draconian penalties that the DLSE may impose upon recalcitrant employers, employers are cautioned to implement procedures and practices that address the following:
• Compliance with California wage-hour laws;
• Designation of a “point person” to maintain and observe the status of pending wage-hour litigation, whether before the DLSE or in Superior Court;
• Identification of “managing agents” of the business to provide notice of potential liability so as to ensure their participation in enforcing compliance with wage-hour laws and review of time and pay issues;
• Timely appeal in correct procedural form of any wage decision against the employer; and
• Immediate involvement of employment counsel in the face of any pending wage-hour litigation or judgment.