Bridgeville Properties Inc. (BPI) owned property in unincorporated Humboldt County, California that included eight rental units, a post office and its own water system.
Between 2009 and 2016, Elsie Seviour-Iloff and Laurance Iloff performed various tasks for BPI, such as managing the water network and sending rent notices, for free rent.
BPI terminated the Iloffs’ work when it suspected that Laurance was not carrying out its maintenance work, was stealing equipment and supplies from BPI, and was using the water rights for a private company.
The Iloffs filed claims with the labor commissioner alleging that they each owed $132,880. After a hearing, the labor commissioner ruled that the Iloffs were entitled to recover wages, overtime, damages, interest and waiting time penalties.
In addition, the labor commissioner found that Cynthia LaPaille, who served as chief executive officer and chief financial officer of BPI during the relevant period, was personally liable for these amounts.
LaPaille and BPI appealed to Superior Court, where a five-day trial took place. The court determined that the Iloffs were employees of BPI and awarded statutory damages, but found that BPI’s failure to pay was in good faith, refusing to award liquidated damages or declare LaPaille personally liable for non-payment of wages by BPI.
The Iloffs appealed, and the appeal committee overturned LaPaille’s individual liability.
Section 558.1 imposes liability on a “person acting on behalf of an employer” who violates the Labor Code. LaPaille argued that the statute does not explicitly authorize a private right of action, as it contains a comprehensive scheme of enforcement by an administrative body.
The court disagreed.
“Here, there is no exclusive system of enforcement by an administrative agency,” the court wrote. “Although the commissioner of labor has the authority to enforce California labor laws, the legislature has also granted California employees a private right of action for unpaid wages. Section 1194(a) provides that “any employee receiving less than the statutory minimum wage … shall be entitled to recover in civil action the unpaid balance of the full amount of such minimum wage or overtime pay. , including interest, reasonable attorneys’ fees and court costs.’ In doing so, it makes little sense that the legislature would authorize the commissioner of labor to impose actions against individuals, but prevent such recovery for employees simply because they can choose to bring a civil action.
The legislature would not have created effectively unenforceable individual liability, the court added, because legislative history shows that legislators were concerned about wage theft and passed various provisions to discourage employers from violating judgments in court. improving collection methods.
“[T]The wording of the law achieved these goals by (1) allowing employees to hold certain individuals accountable for wage violations; and (2) empowering the commissioner of labor to assist employees in collecting resulting judgments, including against those liable,” the panel said. “Accordingly, Section 558.1 must be construed as permitting a private right of action.”
Although the provision offers discretion with language that “[a]Any employer or other person acting on behalf of an employer…may be held liable,” it grants prosecutorial discretion rather than judicial discretion.
The panel agreed with LaPaille that section 558.1 does not apply retroactively, but found that liability for minimum wage dates back to 2013, when section 1197.1 – which first provided for individual liability for wage minimum – has been enacted. Section 558.1 represents a procedural extension of an existing liability, the court noted, leaving LaPaille on the hook.
Sent back to the trial court, the panel reversed LaPaille’s denial of individual liability.
“[A]Allowing courts to excuse such individual liability would undermine the purpose of section 558 – to facilitate an employee’s ability to collect unpaid wages,” the court wrote.
To read the decision in Sever-Iloff c. StrawClick on here.
Why is this important: Containing a warning for corporate executives, the appeal panel found that employees have a private right of action to name individuals in an action alleging wage violations and to hold them personally liable for those violations.