A California law taking effect January 1, 2016, should catch the attention of employers nationwide. SB 588, also known as the Fair Day’s Pay Act, expands the list of tools the California labor commissioner can use to crack down on employers for wage-theft violations or nonpayment of wages to employees. Wage theft can include paying employees for fewer hours than they actually worked, or paying them less than minimum wage or the applicable overtime rate.
Effect of the New Law
The law allows the California labor commissioner to take additional measures to collect from employers when appeals for nonpayment of wages have been exhausted and final judgments are still owed. Such measures may include:
- Prohibiting the employer from continuing to conduct business in the state by imposing a stop order on the business as specified in the law or requiring the employer to take out a bond in an amount up to $150,000.
- Filing a lien on real estate, or a levy on an employer’s property.
- Holding the employer, or certain high level individuals acting on behalf of an employer, liable for violations of any provision regulating minimum wages or hours and days of work or other related provisions of the law.
- Denying a business license to an employer in the long-term care industry as defined in the law.
The Fair Day’s Pay Act springs from the concern that employees often cannot collect on judgments for unpaid wages, which can reach up to $1.5 billion annually in California, according to the U.S. Department of Labor. A 2013 study by the UCLA Labor Center and the National Employment Law Project found that only 17 percent of workers who won cases against their employers were able to collect unpaid wages. Too often, the employers closed the business and reopened under a new name.
The new law helps close this loophole by allowing the labor commissioner in certain instances to target the employer, rather than the offending enterprise, and to act on the workers’ behalf.
Of course, the vast majority of business owners compensate their workforces as required. But this law helps eliminate wiggle room for “bad actors” in California who seek to avoid their obligation.
A Potential Warning to Other Jurisdictions
Is SB 588 a bellwether for employment legislation in other states? “There are similar types of laws in many other states and local jurisdictions but the Fair Day’s Pay Act is likely the most stringent,” said Mike Trabold, Director of Compliance for Paychex. “However, we may in fact see other states attempt to strengthen enforcement to this level.”
Employers are encouraged to “make sure you’re familiar, and in compliance, with all applicable wage and hour laws and enforcement efforts, and be sure to respond appropriately to any claims against your company,” Trabold said.