Owners and officers of California companies have always been able to rest easy knowing that, absent extenuating circumstances, they would not be held personally liable for wage and hour law violations. Recently, though, a Court of Appeal issued a decision reversing this. Now, mistakes in calculating wages or underpayment of employees may end up costing not only employers large sums, but can end up being owed by the companies’ owners or officers.
In Atempa v. Pedrazzani, two former restaurant employees brought claims against their former employer, Pama, Inc., and its owner, Pedrazzani. The employees’ claims included unpaid minimum wage and unpaid overtime. The employees also made a claim under the Private Attorney General Act (PAGA), which we have written numerous articles on before. The employees prevailed at trial, winning both their unpaid wages, a PAGA award, 75 percent of which is remitted to the State of California, and their attorney’s fees under PAGA. The trial court held Pama, Inc. and Pedrazzani jointly and severally liable for the award, even though Pedrazzani was not the employer of either employee.
Shortly after the judgment was rendered, Pama, Inc. filed for bankruptcy, leaving Pedrazzani as the only party who would be on the hook to pay the award. Pedrazzani appealed. Pedrazzani did not challenge the judgment, but instead argued only that he should not be held personally liable for the award. Pedrazzani based his argument on the fact that he was not the employer of the two employees, nor was there any legal basis to find him liable for the company’s debts. In short, Pedrazzani sought to rely on the legal shield a corporation can provide.
The Court of Appeal disagreed with Pedrazzani and found there was language within the statutes which allowed for some “other person” who “act[s] on behalf of the employer” to be liable for the civil penalties associated with the violations. In this case, that meant Pedrazzani, as the owner of Pama, Inc., was liable for the two employees’ unpaid wages and attorney’s fees. Because Pedrazzani had appealed, added to his bill were post-judgment interest and additional attorney’s fees incurred by the employees.
This case adds to this list of reasons why employers must take steps to ensure they are in compliance with wage and hour laws. As illustrated here, company owners, officers, or other agents can be named personally in a lawsuit and held liable for these types of violations. As we discussed in last month’s article, minimum wage increased on January 1, 2019, in California. Companies who did not raise their employees’ wages as necessary are at risk and now their owners and officers may also be held personally liable for any unpaid wages.
If your company has employees and you would like assistance in complying with California’s extensive wage and hour laws, call the attorneys at Navigato & Battin.