New law lets employees sue for late payment of wages

If you thought employers were overburdened with wage penalties in California, you were wrong.

Well, you were right, but apparently the California legislature doesn't think so.

Starting January 1, California employees will be able to seek penalties from their employers for late payment of wages. 

Employers are already subject to penalties for paying wages late when an employee resigns or is terminated. But now an employee can recover penalties for wages that are paid late during employment. 

Assembly Bill 673 amends California Labor Code § 210 to create a new private right of action to seek penalties for the late payment of payday wages.  Previously, only the Labor Commissioner was permitted to seek penalties under § 210. The law, which will take effect January 1, also applies to wages of employees licensed under the Barbering and Cosmetology Act.

Under § 210, the penalties for late paid wages are $100 for the first violation and $200 for each subsequent violation. In addition, the employer must pay 25 percent of the wages that were paid late.

For example, let's say an employee's biweekly pay is $1,200. If the employer pays the employee late (a first violation), the employee can recover $400 ($100 penalty plus 25 percent of $1,200, or $300). And none of the employee's recovery has to be shared with the state. This is in contrast to penalties under the Private Attorneys General Act.  

Until now, an employee could seek penalties for late pay only through PAGA. Under PAGA, the penalty is only $100 or $200, and 75 percent of the penalty has to be paid to the State of California. So, which penalty do you think an employee will try to recover -- $400 under the newly amended § 210, all of which the employee can keep, or $100 or $200 under PAGA, in which the employee can keep $25 or $50?

And this raises another question: Can an employee seek recovery under both § 210 and PAGA?

No. The only good news for employers in AB 673 is that employees have to choose whether to recover under § 210 or under PAGA. The Labor Commissioner can seek § 210 penalties through administrative proceedings but no longer has the right to recover them by filing suit in court.

In short, § 210’s expanded scope and greater recovery have created the opportunity, and perhaps incentive, for more employees to challenge payroll practices in California.

California employment laws keep employers up at night, wondering what is coming next. There always seems to be something. From new statutes to new regulations to new court decisions, we will keep you up to date on developments in the areas of wage and hour, discrimination, leaves of absence, retaliation, class actions, PAGA, and arbitration. We’ll also provide you with practical information on how to update your policies and employment practices. Please subscribe to keep current.

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