Individual Liability for California Wage-and-Hour Violations: Developments on California Authority in 2017

Can employees sue individuals for wage-and-hour violations? That is the question numerous trial courts have been asked since the enactment of California Labor Code section 558.1 (“Section 558.1”) in 2016. Unfortunately, no binding authority on the question exists yet, but several trial courts have concluded that employees can.

Under Section 558.1(a), “[a]ny employer or other person acting on behalf of an employer who violates, or causes to be violated,” several labor code provisions, “may be held liable as the employer for such violation.” The term “other person acting on behalf of an employer” means any person who is an owner, director, officer, or managing agent of the employer. Lab. Code § 558.1(b). Generally speaking, managing agents are corporate employees who exercise substantial independent authority and judgment so that their decisions ultimately determine corporate policy; in other words, “managing agents” aren’t necessarily just company executives.

Not surprisingly, since the enactment of Section 558.1, plaintiffs’ counsel have filed numerous wage-and-hour actions against individual defendants—particularly in situations where the corporate entity may not have enough money to satisfy a judgment, but an individual does. Employers have moved to dismiss the claims, arguing that Section 558.1 authorizes only actions by the California Labor Commissioner. Yet, despite the utter absence of clear and express statutory language that indicates that the Legislature intended to create a private cause of action, several trial courts have denied the motions/demurrers and have found that a private right of action exists. See, e.g., Carter v. Rasier-Ca, LLC, No. 17-CV-00003-HSG, 2017 WL 4098858, at *5 n. 1 (N.D. Cal. Sept. 15, 2017); Rangel v. RTI Properties, Inc., No. BC641439, 2017 WL 2345874, at *2 (Cal. Super. Ct. May 3, 2017); Gonzales v. Starside Security & Investigation Inc., No. 37-2015-00036423, 2016 WL 6989454, at *2 (Cal. Super. Ct. Nov. 18, 2016). However, no binding appellate authority exists.

Fortunately for company owners, directors, officers, and managing agents, most individuals against whom actions are brought rarely will pay for violations out of their own pockets. Under Labor Code section 2802, employers must indemnify employees for expenses, including legal expenses. However, that obligation applies only if employees are working within the scope of their employment when the violations occur.

Employers should continue to monitor the law in this area and perhaps use the statute as a cautionary tale when training HR and managerial employees on the nuances of California wage-and-hour law.